Zacks Industry Outlook Highlights: Coca-Cola, PepsiCo, Dr Pepper Snapple Group, McCormick and Procter & Gamble

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Oct 14, 2014, 10:29 ET

CHICAGO, Oct. 14, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Consumer Staples (part 2), including Coca-Cola Company (NYSE:KO-Free Report), PepsiCo, Inc. (NYSE:PEP-Free Report), Dr Pepper Snapple Group, Inc. (NYSE:DPS-Free Report), McCormick & Co., Inc. (NYSE:MKC-Free Report) and Procter & Gamble Co. (NYSE:PG-Free Report).

Industry: Consumer Staples (part 2)

Link: http://www.zacks.com/commentary/34828/

The global financial crisis of 2008 threatened the existence of a number of key industry players. But many companies in the consumer staples sector managed to survive on the back of effective cost-control initiatives, inorganic growth and share buybacks. A gradual recovery in the European economy last year and the strengthening of the U.S. dollar are also showing up in the results of these companies.

For example, soda giants The Coca-Cola Company (NYSE:KO-Free Report), PepsiCo, Inc. (NYSE:PEP-Free Report) and Dr Pepper Snapple Group, Inc. (NYSE:DPS-Free Report) have outperformed expectations in the first half of 2014 driven by aggressive marketing initiatives, cost containment and improved productivity. A sequential improvement in beverage volumes in the second quarter of 2014 was the highlight of the quarter, which impressed investors. Buoyed by the strong performance in the reported quarter, Dr Pepper Snapple and Pepsi raised their earnings outlook for full-year 2014. We also believe that these companies will keep the momentum going in the second half.

Food company McCormick & Co., Inc. (NYSE:MKC-Free Report) has also been benefiting from significant cost savings and share buybacks. The company has also raised its fiscal year earnings forecast on the back of solid fundamentals.

Below, we discuss some of these key reasons and what investors in the consumer staple sector can look forward to seeing in the coming months.

OPPORTUNITIES

Innovations

In a crowded and competitive space, consumer product companies need to regularly innovate and upgrade their brands to create differentiated value propositions for their customers and to remain successful.

Innovation has been a driving force for consumer product giants like The Procter & Gamble Co. (NYSE:PG-Free Report). P&G believes that consistent product innovation, supported by strong marketing and commercialization, will help deliver stronger results over the long term. Notably, the company spends around $14 billion on marketing annually.

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