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Here's Why P&G Just Lost a Long-Time BullHere's Why P&G Just Lost a Long-Time Bull Barron's (Online); New York As the Russian invasion of Ukraine continues to drag on, analysts are looking to handicap the impact on companies across sectors. JPMorgan took a look at consumer products companies on Wednesday, and warned that Procter & Gamble's recent outperformance may be at risk—but sees safer havens in other stocks. Analyst Andrea Teixeira cut her rating on Procter & Gamble (ticker: PG) to Neutral from Overweight, the first time she's stepped to the sidelines on the stock in three and a half years, and lowered her price target to $165 from $181. She notes that she's been impressed by the company's innovation and execution throughout its turnaround, initiated in 2016, and that this "virtuous cycle led to market share gains across a number of the company's country category combinations that we believe is sustainable." Yet while she's still a believer in P&G, she does think that the stock's valuation has baked in its advantages; moreover, investors have gotten accustomed to beat-and-raise quarters from the company, which will likely be harder to come by in the current environment, marked by higher costs and foreign exchange headwinds. Therefore she argues that "it is prudent to take a pause and wait until consensus incorporates a more realistic outlook." That said Teixeira doesn't think that investors have to avoid the sector entirely. Some of her favorite stocks include Coca-Cola (KO), given the structural changes the company has put in place in recent years, Constellation Brands (STZ), which boasts a healthy outlook and best-in-class margins, and Estee Lauder (EL), which she argues has fallen too far given its growth potential. She has Overweight ratings on all three stocks and price targets of $68, $278, and $317, respectively. Procter & Gamble is off 1.5% in early trading to $153.03; the shares have slipped 5% year to date, although they're still up nearly 15% in the past 12 months. Other analysts have been more optimistic about P&G's ability to navigate coming challenges, following strong results at the start of the year, and ongoing pricing power . Nonetheless, investors are keeping a close eye on consumer companies' exposure to Russia and Europe as the conflict continues—not only is Russian consumers' spending power constrained , but a strong dollar hurts companies that get large portions of business from overseas. |
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