Barclays cuts target prices for European consumer staple stocks

Analysts at Barclays cut their target prices for a wide swathe of European beverage stocks in order to factor-in the impact from the coronavirus epidemic on trading in Europe and the US, as opposed to just China and Asia Travel Retail.

Their target price for AG Barr was cut from 460.0p to 380.0p, for Britvic from 940.0p to 770.0p, for C&C Group from 310.0p to 170.0p, for Coca-Cola Hellenic from 3,300.0p to 2,6,20.0p and for Diageo from 3,390.0p to 3,130.0p.

No adjustments had been yet been made to estimates for Africa and Latin America "as the virus has not progressed as far in these regions."

Changes to their forecasts were made under the assumption that the virus would follow a path similar to that seen in China, with a peak expected in April and "in line with the UK government’s confidence that the situation will be over in 12 weeks".

Worth noting, the oil price drop could result in a "beer dividend", the analysts said, especially in the States.

Furthermore, the majority of the sector had "very limited" refinancing to be done over the next 12 months, Barclays said, adding that at current market levels they spied the potential for increased mergers and acquisitions.

The analysts did upgrade their recommendations for AB InBev and C&C Group to 'equalweight', also telling clients that they remained "very positive" on Heineken and Carlsberg in the beer space.

In the case of the latter, they attributed its share price drop mainly to its exposure to China "unfairly in their view".

On the spirits side of the equation, Diageo was their preferred stock, due to its limited exposure to travel retail and in soft drinks they still favoured CCH.