Goldman says sell Pepsi, buy Coca Cola

Goldman swaps sell call on Coca-Cola to PepsiCo on growth outlook

Goldman says sell Pepsi, buy Coca Cola, Stockwinners
Goldman says sell Pepsi, buy Coca Cola

In a research note to investors on the beverage space, Goldman Sachs analyst Judy #Hong upgraded Coca-Cola (KO) to Neutral and downgraded PepsiCo (PEP) to Sell.

While the analyst sees an improving organic sales growth outlook for Coca-Cola, Hong sees potential for continued softer North American Beverage volumes to weigh on PepsiCo’s organic sales growth.

BEVERAGE SPACE

Within the Staples sector, beverage valuations look most elevated, while food stocks appear oversold on consensus estimates, Goldman Sachs’ Hong told investors in a research note.

The analyst sees the beverage group’s premium valuation as mostly justified given industry characteristics that are more attractive versus secularly challenged U.S. center store food companies.

Goldman says sell Pepsi, buy Coca Cola, Stockwinners.com
Goldman says sell Pepsi, buy Coca Cola,

Beverages have more channel diversification and are less reliant on food grocers, beverage categories tend to have low level of private label penetration and a greater level of market/brand concentration also allows for higher pricing power, she contended.

Hong believes all these dynamics should drive higher top-line growth and more insulated margin structure for beverage companies compared to food companies in the U.S. over the next 12 months.

Additionally, the analyst pointed out that she sees “a few relevant trends” across the beverage theme playing out thus far in 2018, namely relative convenience store underperformance, comparative alcohol slowdown, and improvement in emerging markets benefiting multinationals, particularly in Latin America.

SWAPPING COCA-COLA, PEPSICO

Goldman Sachs’ Judy Hong upgraded Coca-Cola to Neutral from Sell, while trimming her price target on the shares to $46 from $47.

The analyst told investors that she sees an improving organic sales growth outlook, a “cleaner base” post-refranchising, and better visibility on its margin and earnings targets.

Hong believes Coca-Cola is “one of the rare” over 4% organic growth mega-cap stories, and now has increased confidence in its organic sales growth outlook.

Additionally, Hong noted that she now views fundamentals as warranting a relative premium given Coca-Cola’s positioning as a beneficiary of moderating foreign exchange impact, improving emerging markets growth, and higher margins post-refranchising.

Meanwhile, the analyst downgraded PepsiCo to Sell from Neutral and lowered her price target on the shares to $110 from $118, citing the potential for continued softer North American Beverage volumes to weigh on organic sales growth and present modest downside risk to gross margins.

While the analyst does not expect Pepsi shares to be “a material absolute underperformer,” she does see scope for it to underperform other beverage names over the next 12 months given muted fundamentals and lack of clear catalysts. Both top-line and margin gains are likely to be harder to come by for PepsiCo’s North America beverage business as multi-year tailwinds to volume are no longer driving growth while c-store underperformance is creating a drag, she contended.

OTHERS TO WATCH

Goldman’s Hong also upgraded Coca-Cola European Partners (CCE) to Buy, as she believes muted sentiment in the context of sugar tax implementation in the UK and France provides a compelling opportunity, and downgraded Molson Coors (TAP) to Neutral, predicting that weaker than expected beer volumes will drive cuts to consensus estimates. The analyst reiterated a Buy rating on Monster Beverage (MNST).

PRICE ACTION

In Tuesday’s trading, shares of Coca-Cola are fractionally up to $44.79, while PepsiCo’s stock dropped over 1% to $108.41.


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Biogen to present positive data on MS

New data underscores benefits of Spinraza across SMA populations

Biogen says BAN2401 did not meet primary endpoint. Stockwinners.com
Biogen to present positive data on MS

Biogen (BIIB) announced it will present data from its portfolio of marketed treatments and clinical development programs for some of the most complex and difficult-to-treat neurodegenerative diseases at the 70th annual meeting of the American Academy of Neurology in Los Angeles.

Biogen will present data demonstrating that with #SPINRAZA treatment, older patients were able to walk longer distances while experiencing stable or less fatigue at the same time, in contrast to SMA natural history data.

The study participants had Type 2 or 3 SMA and were ages 2-15 years at study enrollment.

Several other analyses illustrating SPINRAZA’s effectiveness will be presented, including part one of the Phase 2 EMBRACE study as well as an interim analysis of the SHINE open-label extension study.

Featured in AAN’s Emerging Science program, the SHINE analysis examined the longer-term safety and efficacy of SPINRAZA in infantile-onset SMA patients.

Data from Biogen’s collaborative research initiative to identify a quantitative blood biomarker of MS disease severity will be presented.

These data further support serum neurofilament light as a promising biomarker for disease severity stratification and treatment monitoring in MS.

A biomarker like NfL levels may enhance treatment decision-making and ultimately lead to better long-term outcomes for people with MS. Biogen will present updates from MS PATHS, a collaboration with 10 leading MS centers in the U.S. and Europe that leverages technology deployed in routine care to generate standardized, high-quality data.

Researchers anticipate more than 15,000 people with MS will participate in the study.

MS PATHS allows researchers to evaluate common and disruptive MS symptoms, such as cognitive changes, to help drive more evidence-based, personalized treatment decisions.

Real-world data will be presented that demonstrate people with relapsing MS treated with TECFIDERA or TYSABRI early in the course of their disease may experience better long-term outcomes.

MRI and relapse results from the Phase 3 EVOLVE-MS-1 study for BIIB098 in patients with relapsing remitting MS will be featured in AAN’s Emerging Science program.

BIIB098 is an oral, monomethyl fumarate prodrug in Phase 3 development for the treatment of relapsing forms of MS. Data from the Phase 1b study of aducanumab, Biogen’s investigational treatment for the early stages of Alzheimer’s disease, will be presented.

The aducanumab 36-month data from the Phase 1b PRIME study have been identified by AAN as a 2018 Abstract of Distinction, a program recognizing top scientific achievements in each abstract topic area; 24-month titration data will also be presented.

Data from movement disorder programs will be presented at the meeting, including Phase 1 study results for BIIB092 (formerly BMS-986168), the tau-targeting antibody and investigational compound for PSP, as well as details about the design of the ongoing Phase 2 PASSPORT study.

PSP is a rare neurodegenerative disease, considered to be a primary tauopathy, characterized by rapidly progressing physical impairments, such as difficulty speaking, swallowing and walking, as well as cognitive/behavioral impairments, such as apathy and dementia.

Data for Biogen’s investigation compound for PD, BIIB054, an alpha-synuclein targeting antibody, include Phase 1 study results demonstrating a favorable pharmacokinetics, as well as a safety and tolerability profile which support further clinical development.

BIIB closed at $263.11.


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