We are presenting a “too early” 2024 Consumer Staples themes black book focusing on food and beverage companies on Thursday, October 19th at 12:30 PM ET. The XLP has declined 12% in the past quarter. The threat from GLP-1 drugs has been foremost on the minds of investors, with the rapid adoption leading to a dramatic reduction in food and beverage consumption by some patients. However, GLP-1 drugs are not the only reason behind the underperformance of the Consumer Staples sector. Higher interest rates, unit volume declines, growing private label share, and a weaker consumer outlook are also responsible for the contraction in the sector’s valuation multiples.
Event Details:
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We will explore a number of topics that look to be top of mind in 2024, including:
- Top line outlook – why estimate revisions will be down.
- Margin outlook – why estimate revisions will be down.
- GLP-1 – why the threat is irrefutable, and the shorts have the upper hand for now.
- Historical valuations – can we look to historical valuations for a floor?
- Unit volumes – why the volume declines remain a headwind for group multiples, but not earnings.
- Higher interest rates – how it changes the group’s valuation bands.
- Private label share – is the threat larger than it was pre-pandemic?
- Consumer spending – how the timing of numerous headwinds has set up a perfect storm.
With the headwinds outnumbering the tailwinds, the sector appears un-investable. With a longer duration, investors are presented with the best entry point for certain Consumer Staples companies since the initial pandemic outbreak. We are focused on companies with secular growth opportunities, limited exposure to sector headwinds, large TAM opportunities, and management teams with the right strategies and brands to succeed over a multi-year duration. We will make our case for why the current sell-off is mostly multiple rather than earnings and what the setup for a relief rally will look like.
Stay tuned for additional details. We hope you can join us.
