Procter & Gamble (PG), Estee Lauder (EL) and Constellation Brands (STZ) can navigate any economic slowdown in the short term while offering long-term growth opportunities, according to Citi in a new research note. The bullish call on these consumer-tied companies aligns with our view and comes as defensive stocks have fallen out of favor in 2023, with many investors instead piling into beaten-down tech names. What Citi thinks Analysts at Citi chose our three Club holdings among their top-rated picks — initiating coverage in U.S. beverages, household and personal care products. While these high-quality names have seen temporary pain in a tougher economic climate with still-elevated inflation, analysts argued they offer “compelling long-term growth stories at reasonable valuations.” PG YTD mountain P & G (PG) YTD performance Like many multinationals, Procter & Gamble, has been weighed down by a strong U.S. dollar, making its products more expensive to international consumers. The company has also been pressured by higher commodity, material and freight costs. But those inflationary trends appear to be easing. Additionally, the company’s product price hikes don’t seem to be impacting sales. In its fiscal 2023 third-quarter guidance , P & G expects, in aggregate, a $3.7 billion, or $1.50 per share, after-tax drag — smaller than its prior outlook for a headwind of $3.9 billion, or $1.57 per share. At the same time, the consumer products powerhouse, whose high-quality brands include Tide, Pampers and Gillette, has been able to raise prices on its products with minimal pushback — contributing to 5% organic sales growth in fiscal Q2 and estimates for 4% to 5% organic sales growth in the current fiscal third quarter. With these factors in mind, Citi sees the company in a “better position to navigate through a challenging macro environment.” Moreover, analysts see an “attractive entry point” to scoop up P & G shares, which have dropped more than 7.5% year to date, following the company’s overall poor fiscal second-quarter earnings in late January. Citi has a $160-per-share price target on the stock, which rose 2% on Friday to about $140. STZ YTD mountain Constellation Brands (STZ) YTD performance Citi also said it’s time to buy Constellation Brands, the company behind Mexican beers Corona, Modelo and Pacifico. Shares have fallen about 2% so far in 2023 following a rough December after its beer brand experienced tempered demand due to poor weather in key markets like California. The firm said, at the time, that short-term headwinds will improve to help drive “medium-term beer top-line growth.” Analysts at Citi have a $265 price target on the stock, which fell slightly lower Friday to just under $227. EL YTD mountain Estee Lauder (EL) YTD performance Citi also estimates “strong topline/margin recovery” from Estee Lauder as China’s economy continues to reopen. China accounts for roughly a third of the company’s revenue. Estee Lauder, a leading…
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