RBC Capital previews March quarter, highlights top stock picks

Tuesday’s market activity saw RBC Capital Markets providing preliminary insights into the March quarter earnings season for consumer packaged goods (CPG) companies. The firm anticipates another challenging quarter, marked by sluggish top-line growth and limited earnings per share (EPS) flexibility due to volume deleverage. Despite a slight improvement in foreign exchange (FX) rates, RBC Capital analysts note that regulatory and geopolitical risks persist, potentially leading companies to intensify marketing efforts to stimulate volume and reach the lower end of their guidance ranges, with some possibly needing to reduce their full-year forecasts.

RBC Capital’s focus for the upcoming earnings includes a selection of companies expected to perform relatively well or face challenges. KVUE is anticipated to report an acceptable quarter, considering the tough market conditions. Monster Beverage Corporation (NASDAQ:MNST) is predicted to show a rebound in top-line growth and benefit from its innovation pipeline. Keurig Dr Pepper Inc. (NASDAQ:KDP) is recognized for its strength in the U.S. Refreshment Beverages segment. Performance Food Group Company (NYSE:PFGC) is also expected to maintain its business momentum.

Conversely, the firm expresses caution regarding several other companies as they approach their earnings reports. PepsiCo, Inc. (NASDAQ:PEP) may continue to experience pressure in snacking and domestic markets. Procter & Gamble Co. (NYSE:PG) faces headwinds with destocking and slower U.S. sales, with its international segment remaining a concern. The Clorox Company (NYSE:CLX) could see potential destocking and increased promotional activity affecting its bags and litter segments. Spectrum Brands Holdings Inc . (NYSE:SPB) is dealing with demand softness and heightened competition. Mondelēz International, Inc. (NASDAQ:MDLZ) is likely to continue facing pressure in North America.

Looking beyond the immediate quarter, RBC Capital’s top picks for the remainder of the year and into 2025, in order of preference, are Performance Food Group, Monster Beverage, Keurig Dr Pepper, Utz Brands Inc. (NYSE:UTZ), and Constellation Brands, Inc. (NYSE:STZ). These selections are based on the current information available to the analysts at RBC Capital, who plan to publish more detailed company-specific previews closer to the actual earnings releases, incorporating the latest checks and thoughts. For investors seeking deeper insights into these companies and others in the consumer goods sector, InvestingPro offers comprehensive research reports with detailed financial analysis and Fair Value assessments for over 1,400 US stocks.

In other recent news, Spectrum Brands reported its fourth-quarter 2024 earnings, exceeding analysts’ expectations with an earnings per share (EPS) of $1.02, surpassing the forecasted $0.91. However, the company’s revenue for the quarter was slightly below expectations, coming in at $700.2 million against the anticipated $705.9 million. Despite the revenue shortfall, Spectrum Brands launched the "Superior Delivers" initiative, aiming for significant EBITDA improvements. In a separate development, Oppenheimer maintained its Outperform rating for Spectrum Brands, with a $105.00 price target, noting the company’s undervaluation compared to peers. The firm emphasized the strong performance of Spectrum Brands’ Home & Garden division and the challenges faced by the Pet supplies segment in the U.S. Meanwhile, UBS also rated Spectrum Brands as a ’Buy’ during the ongoing UBS Global Consumer and Retail Conference, reflecting a steady outlook despite sector challenges. These recent developments indicate Spectrum Brands’ strategic focus on its core segments and ongoing initiatives to drive future growth.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.