We recently made several changes to our position monitor following the Q2 earnings season and looking out towards the 2H of the year. Our Macro Team is calling for three more quarters of Quad 4, a favorable backdrop for the Consumer Staples sector. The competitive and inflationary environments are always changing and base effects have a tendency to reshuffle the winners and losers. We will review where we see inflection points in the Q2 results.
Our call will focus on the companies on our position monitor, their competitors, customers, and suppliers. We will highlight changes in the competitive dynamics, pricing plans, and price elasticity.
We will provide a summary of the earnings results, where we project estimates will be revised lower or higher, and key inflection points.
We hope you can join us.
Call Details:Date & Time: Monday, August 22 @ 2 PM ET. Webcast & Slides: CLICK HERE. Add to your Outlook Calendar: Click Here. |
The changes we have made during the Q2 reporting season:
PRGO moves to #2 long. The concern about the legal risk from Zantac has provided a buying opportunity. The Hatch Waxman Act provides strong legal protection from product liability lawsuits. The case is entirely different from the pharmaceutical companies that have much deeper pockets, a more straight forward case, and a larger base of claimants that are able to prove usage of the drug.
STKL moves to #3 long. Both segments came together in Q2. Plant-based milks continue to grow despite inflation and pressure on the consumer. Within plant-based milk, SunOpta is gaining share. New capacity additions are leading to upside in estimates.
BJ moves up two spots. Top line trends have a tailwind in the current environment. Wholesale clubs are taking share in grocery.
UTZ moves up four spots. The PPI for fats and oils decelerated 1600 bps. Freight spot rates have also been falling and new contracts will be under pressure supporting an inflection in margins that have been driven by price increases so far.
LANC moves up one spot. Similar to the UTZ rationale plus strength in Chick Fil A.
Adding WMT to the long list. Earnings revisions are inflecting from negative to positive. 2H estimates appear too conservative. Excess inventory is not behind it, but it is in process. The inflationary environment is driving customers to the store. Driving traffic to the store is probably Walmart’s largest challenge pre-pandemic, but the environment itself is now taking care of traffic.
Our updated position monitor:
