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Beverage Analyst Sees Trends Improving in 2008 |
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Tuesday, 11 September 2007 |
NEW YORK: Beverage shares rose Tuesday after a Goldman Sachs analyst upped her rating on the sector, saying profit may be much higher in 2008 with lower commodity costs, higher demand for beer and several new products on the market.
Analyst Judy E. Hong raised her rating to "Attractive" from "Neutral" and said although this year has been "tough for the U.S. beverage industry owing to outsized commodity cost inflation," companies may enjoy improved performance in 2008 as costs stabilize.
Hong said judging by current spot prices, most major commodities that are needed to make and bottle beverages -- aluminum, resin, oranges and corn -- will be flat or down into 2008.
With costs down, soda companies should be able to institute more moderate price increases, which should help demand.
She added that soft drink bottlers may also be helped by new products in the distribution network. Coca-Cola Co.'s purchase of Vitamin Water and PepsiCo Inc.'s new Propel water and G2 lower-calorie Gatorade drink may help enhance the bottlers' earnings during the year.
Brewers, meanwhile, she said, are experiencing higher demand already with shipments up 1.9 percent from January to July. Although Anheuser-Busch Cos. Inc. is struggling with falling market share of its core brands, the increase in shipments may be enough to allow the company to hit its earnings targets in 2008, Hong added.
Besides the sector upgrade, Hong raised her rating on PepsiCo's shares specifically. Hong upped the rating to "Buy" from "Neutral" and added it to the investment bank's top picks in the sector. Brewer Molson Coors Brewing Co., energy drink maker Hansen Natural Corp. and Coca-Cola are also on Hong's top picks list.
PepsiCo shares rose $1.10 to $69.57 in midday trading and Coca-Cola shares climbed 43 cents to $55. Shares of Pepsi Bottling Group Inc., PepsiCo's bottler, grew $1.02, or 2.9 percent, $36.55 while shares of Coca-Cola's bottler, Coca-Cola Enterprises Inc., rose 12 cents to $23.97.
Anheuser-Busch shares rose 15 cents to $49.74, while Molson Coors Brewing Co. shares climbed 71 cents to $90.80.
Hansen shares, meanwhile, rose 42 cents to $47.35. Copyright 2007 Associated Press. All rights reserved. This material may not be
Copyright 2007 AFX News Limited. All Rights Reserved.
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