Analysts’ Top Consumer Goods Picks: PG, ARA

There’s a lot to be optimistic about in the Consumer Goods sector as 2 analysts just weighed in on Procter & Gamble (NYSE: PG) and American Renal Associates Holdings Inc (NYSE: ARA) with bullish sentiments.

Procter & Gamble (NYSE: PG)

In a report issued on November 18, Kevin Grundy from Jefferies reiterated a Buy rating on Procter & Gamble (NYSE: PG), with a price target of $93. The company’s shares opened today at $82.

Grundy wrote:

“We remain positive on P&G after the co.’s analyst day where mgmt reiterated its LT growth algo and underscored its emphasis on balanced top/bottom line growth. Recent USD strength may pressure results but we view FY17 guide as sufficiently conservative. YTD trends are solid and we like the set-up with room to re-rate as org sales growth improves.”

According to TipRanks.com, Grundy is a 1-star analyst with an average return of -0.8% and a 42.1% success rate. Grundy covers the Consumer Goods sector, focusing on stocks such as Spectrum Brands Holdings, Estee Lauder Companies, and Edgewell Personal Care.

Procter & Gamble has an analyst consensus of Strong Buy, with a price target consensus of $87.

American Renal Associates Holdings Inc (NYSE: ARA)

In a report issued on November 18, Ana Gupte from Leerink Swann reiterated a Buy rating on American Renal Associates Holdings Inc (NYSE: ARA), with a price target of $27. The company’s shares opened today at $23.02.

Gupte commented:

“We remain positive on ARA and reiterate our OP rating at PT of $27 post a good operational quarter but lower our FY17 EBITDA less non-controlling interest (NCI) on payor mix downside from ACA. We see the rally in the name as likely to be driven by a more benign CMS post the election on the guidance for patient education and assistance on Exchanges. The market may see the headwind of $17 MM as already baking in downside from Repeal. The company posted net revenue of $193 MM vs. consensus of $189 MM. EBITDA ex-NCI of $33MM was in-line with the Street expectation. Key metrics were solid. While ARA continues to employ Aranesp as its ESA (Erythropoietin Stimulating Agents), penetration of 80% has reached plateau and further savings is only expected in 2018 with expected launch of the biosimilar. As far as the controversy around patient education and mix shifting of Medicaid eligible, ARA has paused patient assistance to the 300 patients enrolled in minimum essential Medicaid coverage and are seeking additional coverage through an ACA plan for the 2017 open enrollment season. While the company expects regulatory guidance from CMS on charitable premium assistance in near term, we lower our FY17 EBITDA less NCI from $146 MM to $128 MM to reflect downside from pause in patient assistance to Exchange eligibles on Medicaid which will lower their ACA mix starting from Jan 1, 2017. Balance sheet is decent with post IPO leverage of ~3.6x which we expect to come down further through organic cash flow generation.”

According to TipRanks.com, Gupte is a 4-star analyst with an average return of 4.9% and a 65.9% success rate. Gupte covers the Healthcare sector, focusing on stocks such as WellCare Health Plans, Universal American, and Acadia Healthcare.

Currently, the analyst consensus on American Renal Associates Holdings Inc is Strong Buy and the average price target is $27.50, representing a 19.5% upside.

In a report issued on November 3, Barclays also reiterated a Buy rating on the stock with a $29 price target.