Alcohol farm

Bank Of America Sees The Rise In These 2 European Liquor Stocks

A new report from Bank of America cites Diageo (NYSE: DEO) and Pernod Ricard (OTC: PRNDY) as US-listed alcoholic beverage companies expected to show resilience even in a weak consumer environment.

Both stocks have been posting year-to-date declines, as well as losses over shorter periods.

Meanwhile, other companies, such as Brown-Forman (NYSE: BF.B), Constellation Brands (NYSE: STZ) and Molson Coors (NYSE: TAP.A) are showing signs of life.

Bank of America analysts Andrea Pistacchi and Victor Beltran-Segarra see global alcoholic beverage industry sales rising 5.6% in fiscal year 2023, despite weaker-than-expected performance since the start of the fiscal year. ‘year.

They added that they expected 4.6% growth in the US market.

“In Asia, China is expected to accelerate on easy offsets and potential easing of the Covid zero-tolerance policy, while the rest of the region rebounds strongly,” they wrote.

The recovery of the travel industry should also contribute to the global rebound in beverages. In the United States, analysts pointed out, in-home alcohol spending represents only 1% of Americans’ total income, but adult beverages are “a relatively ‘affordable’ pleasure for most…suggesting that this will be one of the last purchases that consumers will sacrifice. .”

Additionally, according to the report, two-thirds of alcohol spending in the United States comes from households earning more than $75,000 a year. This could bode well for sales, if high earners continue to spend their disposable income on alcohol.

A d x1esports

Get your in-game wallet today!

This games and media holding company brings a unique deployment strategy and a diverse mix of experiences brought by its leadership team to a changing and highly fragmented space.

Despite Bank of America analysts’ optimism about fiscal 2023 and the strength of well-paid consumers, high inflation and rising energy costs could hamper consumer demand for the foreseeable future.

Double-digit sales growth

British company Diageo has grown sales at double-digit rates since March 2021, but growth has slowed. Revenues were also growing at double-digit rates, but growth has been flat recently.

Wall Street expects earnings to rise 15% in fiscal 2023, to $8.30 per share, then another 9% in 2024, to $9.05 per share.

According to data from MarketBeat, analysts have a consensus rating of “hold” on Diageo. The title has been corrected since January. It closed Tuesday at $174.36, up $0.52 or 0.30%. The stock widened earlier in the session, but reversed to close near its session low.

It is currently trading below key moving averages, which does not bode well for investors hoping to enter as the stock is about to make a big price move.

Diageo owns 200 alcohol brands, sold in more than 180 countries. Brands include Johnnie Walker, Guinness, Tanqueray, Bailey’s, Smirnoff, Captain Morgan, Crown Royal and Ketel One.
Bank Of America Sees The Rise In These 2 European Liquor Stocks

First choice as economies recover

In the beverages report, Bank of America said its top pick was Pernod. Analysts cited reasons including the recovery of China and travel, the company’s balance sheet and an attractive valuation. Pernod has a market capitalization north of $48 billion, but as a France-based company it is not tracked by the S&P 500.

Well-known Pernod brands include Jameson, Glenlivet, Chivas and Beefeater, among many others.

Like Diageo, Pernod has also been in liquidation since early January. A rally attempt in April failed and the stock sold off along with the broader global market, following the summer rally in equity markets.

Profits and sales have both increased in recent quarters, following slowdowns in 2020, as the company has clearly been hit hard by closures of bars, restaurants and other out-of-home venues.

This stock is also underperforming the broader market and languishing below longer-term price lines, such as the 50- or 200-day averages, as well as the shorter-term averages.

During economic downturns, consumers often turn to less expensive alternatives. This is true in many product categories, including alcohol. Bank of America calls this phenomenon “trading down”.

Bank of America analysts said Pernod’s U.S. portfolio “should be relatively downside-proof, with the exception of a few smaller brands. Key growth drivers have limited exposure to low-income consumers (Jameson, The Glenlivet, Jefferson’s) or are attractively priced (Malibu) In addition, much of Pernod’s growth in the US is coming from specialty brands that still have plenty of room to grow.

Despite a “buy” rating on the stock, as you can see on MarketBeat’s analyst data page, and some future potential, it’s generally best to avoid a stock that’s currently in a correction.
Bank Of America Sees The Rise In These 2 European Liquor Stocks

Companies mentioned in this article

Compare these actions Add these stocks to my watchlist

Investors who are at or near retirement age know that the need for reliable income is moving up the priority list. This makes investing in dividend stocks a logical choice. Most dividend-paying stocks pay dividends on a quarterly basis. However, for people who don’t have an income stream from employment, quarterly dividends of any size create an uneven income stream. This can be difficult in times of economic volatility, and especially in the face of rising inflation.

One solution for these investors is to buy a special class of dividend stocks that pay dividends monthly. Monthly dividend income is one way to create predictable cash flow. And investors also have access to stocks that have a high dividend yield, sometimes over 10%. That’s nearly 10 times the 1.6% average dividend yield of S&P 500 stocks. And because of the business models of these companies, those returns are sustainable.

In this special presentation, we’ll look at 7 monthly dividend stocks that are yielding more than 10% in June 2022.

See the “7 Dividend Stocks That Gain 10% Every Month”.