Consumer Staples Company Presentation

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Consumer Staples Company Presentation

• Chad Hackett
• Adam Gale

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Consumer Staples Analysis

• Dividends, Dividend yield is higher than SP
  500
• - Earnings are declining relative to SP 500
• - Growing economy Sector performs poorly during
  growth relative to SP 500

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Consumer Staples Composition

• SIM Companies
• Procter Gamble, 4.20 (Household Products)
• Walgreens, 2.11 (Retail Drugs)
• Anheuser-Busch, 3.94 (Beverage - Alcoholic)

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Procter Gamble




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Business Analysis

• Businesses
• Baby, feminine family care
• Fabric home care
• Health care
• Beauty care
• Food beverage
• Main Brands
• Pampers, Always
• Tide, Bounty, Downy
• Crest, Pepto Bismol
• Cover Girl, Pantene, Herbal Essences
• Folgers, Pringles

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Business Demand

• Expected EPS for 2005 2.59
• 11 increase from 2004
• Solid marketing and product innovation skills
• Established brand recognition both domestic and
  international
• Constant demand for PG products

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Business Supply

• PGs growth for the future relies on foreign
  acquisitions and internal expansion overseas
• i.e. Wella AG acquisition in 2003
• India and China remain strong growth drivers
• Increased business in health and beauty-care by
  purchasing Clairol

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Financial DuPont Analysis
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Valuation Analysis
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Valuation Analysis
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Recommendation

• Hold Procter Gamble.
• Remaining a strong player in the consumer staples
  sector
• Internal growth abroad
• Foreign market expansion through acquisition

William Proctor 1837
James Gamble - 1837
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Anheuser-Busch
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Business Analysis

• Businesses
• Domestic and International Beer
• Packaging
• Theme Parks
• Main Products
• Budweiser
• Michelob
• Busch
• Natural Light

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Business Demand

• Consumption is up .8 from 2003
• International growth has contributed to at least
  20 of A-Bs earnings over the past five years
• Anheuser-Busch and Tsingtao Close China
  Investment Agreement
• Increased profits in China by 45
• Demographics Growth of the 21 to 27 year old
  age group
• Inelastic demand for alcohol in general

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Financial DuPont Analysis
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Valuation Analysis
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Valuation Analysis
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Recommendation

• Sell Anheuser-Busch
• Issues
• Revenues shrinking from year to year
• Pre-tax margins at all-time high, but price to
  sales and price to earnings at median levels
• Hugely competitive market with Miller, other
  brewers

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Sysco Corporation
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Business Analysis

• Businesses
• Food distributor
• Supply distributor (plates, silverware, etc
• Main Customers
• Restaurants
• Health-care facilities
• Education facilities

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Business Demand

• Revenue is increasing from year-to-year
• Expected increase in the number of people in
  healthcare facilities
• Growing economy stimulates consumer spending
  (dining out)

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Financial DuPont Analysis
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Valuation Analysis
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Valuation Analysis
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Recommendation

• Buy Sysco Corporation
• Reasons
• Growth rate estimates at an all-time high
  relative to consumer staples sector
• Price-to-earnings and price-to-sales do not
  reflect this expectation
• Certain demand increases via healthcare and
  increased discretionary consumer spending

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CVS versus Walgreen Corporation
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CVS versus Walgreen Business

• Walgreen currently largest U.S. Retail Drug Store
  with 37.5 billion dollars in sales
• CVS is second with 22.6 billion dollars in sales

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Demand

• Increased need for prescription drugs as
  population continues to grow older
• Continued expansion in opening of new stores for
  both companies
• CVS through acquisition (Eckerd from J.C. Penny)

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Dupont - CVS
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Dupont - Walgreen
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Valuation CVS versus Walgreens
CVS WAG Industry
Market Cap 18.50B 40.34B 285.75M
Employees 110,000 117,000 530
Rev. Growth (ttm) 10.00 13.30 13.30
Revenue (ttm) 29.12B 37.51B 573.99M
Gross Margin (ttm) 26.21 27.19 26.21
EBITDA (ttm) 1.94B 2.14B 11.62M
Oper. Margins (ttm) 5.31 5.71 2.27
Net Income (ttm) 912.60M 1.36B 6.20M
EPS (ttm) 2.233 1.319 0.38
PE (ttm) 20.71 29.93 22.84
PEG (ttm) 1.68 1.7 1.22
PS (ttm) 0.64 1.07 0.66
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Recommendation

• Sell Walgreen Corporation to acquire CVS
• More potential for growth in 2005
• Retail drug market is expanding
• Large acquisition of Eckerd will be more
  beneficial in 2005
• Walgreen Corporation above industry ratios

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Questions