The Analysts Like These Consumer Stocks
Consumer stocks have been in sharp focus over the last year because consumer spending has been one of the biggest surprises of the post-pandemic period. While stimulus money is running out, economic activity appears to be self-sustaining and driving stability if not Improvement in the labor market. The bottom line is that consumer stocks should continue to benefit from these tailwinds and results for many of them will be compounded by internal efforts to improve operations. If you are looking for a place to park some money now that stocks are correcting these should be on your watchlist.
Colgate-Palmolive To Outgrow Near-Term Headwinds
The analysts at Deutsche Bank came out with the first commentary on Colgate-Palmolive (NYSE: CL) in over 3 months upgrading the stock to buy from hold. In their view, the company is laser-focused on its operations and working hard to overcome near-term headwinds. Among the top priorities is promoting a healthier growth mindset within the portfolio and analyst Steve Powers thinks the market is underestimating the efforts. Deutsche Bank raised the price target to $86 from $84 compared to the consensus of $85, the $85 consensus assumes about 12.5% upside in the stock and we think it will move higher over the next 6 weeks.
- Colgate-Palmolive is scheduled to report earnings at the end of October. The analysts are expecting over $441 million in consolidated revenue good for a company record. Earnings are expected to grow as well but at a slightly slower rate due to shipping challenges and input costs but nonetheless will improve the dividend safety. Colgate-Palmolive yields about 2.35% and has been raising its dividend for 58 years. The payout ratio is a little high at 56% but not prohibitively so because the company's balance sheet is very strong and raises no red flags for us.
The Analysts Warm To Ruth's Hospitality Group
Data from Pricetargets.com shows Ruth's Hospitality Group (NASDAQ: RUTH) received its second upgrade in as many months, this time coming from Piper Sandler. Piper Sandler issued a double upgrade on the stock going from Neutral to Overweight with a price target of $28. This compares to the analyst’s consensus of a Buy bordering on Strong Buy and the high price target of $29. The consensus price target of $27.65 assumes roughly 35% of upside and is a target we see reached later this year. Not only has the company already regained its pre-COVID business levels and surpassed them, but it is also well within the company's ability to reinstate the dividend.
- Ruth's Hospitality Group suspended its payment at the beginning of the pandemic to preserve capital and maintain a strong balance sheet and those efforts have worked. Now, a year later, it’s time to return some capital to shareholders. Assuming the payout is reinstated at the pre-COVID level it would be worth a yield of 2.95% with shares trading near $20.35. That would be a major catalyst for share prices.
A Double-Digit Gain In Store For Keurig-Dr. Pepper
- Deutsche Bank maintained a hold rating on Keurig Dr. Pepper (NASDAQ: KDP) but up the price target to $36 from $34 bringing it in line with the market consensus. The current consensus for Dr. Pepper is $36.70 and is good for a gain of 8% from recent share prices. Deutsche Bank is the first analyst to come out with commentary since June but we see this changing with the Q3 earnings season fast approaching. The company is slated to report earnings towards the end of October and its business is supported by significant tailwinds that include both stay-at-home activity as well as economic reopening activity. Analysts are expecting a small sequential growth in revenue and we think this is a cautious estimate.
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