UK inflation numbers are the highest in the last 30–40 years. In November 2022, the inflation rate in the UK was 10.67%, after touching 11.1% in October. Adding more fuel to the fire, the experts at Goldman Sachs have commented that the inflation rate in the UK could even cross the 20% mark, driven mainly by high gas prices.
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For investors, this is just another opportunity to look for stocks that are beating inflation and showing stable earnings growth.
Using the TipRanks Trending Shares tool for the UK, we have shortlisted two beverage companies, namely Diageo (GB:DGE) and FMCG giant Unilever (GB:ULVR). These companies are at the top of their game and are quick to adapt to changing situations.
This tool is extremely helpful for investors when they need to get hold of the stocks that have analysts’ interest.
Let’s take a closer look at them.
Diageo
With over 200 brands in its portfolio, Diageo is a market leader in alcoholic beverages, with markets in around 180 countries around the world. Some of the well-known brands of the company are Johnnie Walker, Guinness, Tanqueray, Baileys, Smirnoff, etc.
During an inflationary period, the company’s diverse product line and dominant position in the industry work in its favor. The customer base for its premium brands gives the company an edge on pricing, which is hardly impacted by inflation.
In 2022, the company had a solid performance in terms of higher volumes and profits. Diageo’s net sales were up by 21.4% to £15.4 billion, and operating profits increased by 18% to £4.4 billion. The company’s organic operating margin grew by 121 basis points, driven by its brand value and its price points. The analysts expect this trend to continue in 2023 and provide a cushion for the company in difficult times.
The stock has fallen by almost 10% in the last year, which has made analysts more bullish on the stock.
Is Diageo a Buy or Sell?
According to TipRanks’ analyst consensus, Diageo stock has a Moderate Buy rating.
The target price is 4,360.2p, which is 19% higher than the current price level. The price has a high forecast of 5,010p and a low forecast of 3,542p.
Barclays, HSBC, and Goldman Sachs remain highly bullish on the stock and have recently reiterated their Buy ratings.
Unilever
As one of the world’s largest FMCG companies, Unilever caters to 3.4 billion customers on a daily basis. Its product portfolio, with more than 400 brands, ranges from beauty to health to home care to nutrition, etc.
The last six months have been good for the company, with its stock trading up by 12%. Despite the rising cost inflation, the company is positive about its full-year results after a good performance in the first half.
The company recently issued its trading number for the third quarter of 2022. The company’s sales grew by 10.6% in the quarter. Even though volumes declined by 1.6%, it was offset by a price growth of 12.5%. The company again raised its revenue forecast for the year, now to be above 8% as compared to the 6.5% forecasted earlier.
The economic headwinds have surely hit the margins. However, the company is focusing on cost-cutting measures and high-margin products to increase its operating margins over the next two years. The operating margins for the year are expected to be around 16%.
Is Unilever a Buy, Sell or Hold?
According to TipRanks’ rating consensus, Unilever stock has a Hold rating. The target price is 4,088.2p, which is 2.4% lower than the current price level.
Conclusion
A well-balanced portfolio during inflationary and recessionary times is a must for every investor. Diageo and Unilever are both leaders in their sectors, which gives them the power to play with prices. Moreover, with stable top-line growth, these companies look attractive as the bear market continues.
