ConsumerWatch – The times they are a-changin’

The key takeaway from our quarterly review of the consumer sectors is that there are the first signs of improving momentum to profit estimates for UK and European companies for some time. While overall consensus profit estimates reduced again, for the first time in four quarters the number of companies to receive upgrades increased while the number of downgrades reduced. This follows a similar swing in momentum for North American companies in the previous quarter. A similar relative improvement was seen in all regions in the second quarter of 2023, so it will be interesting to see how estimates change during the forthcoming results season. The external environment (macroeconomic forecasts have been stable or modestly increased and consumer confidence is generally moving in the right direction) appears supportive of better times ahead, but investors should keep an eye on inflation and how unseasonal weather in the UK and parts of Europe has affected companies. Our previous reports have highlighted the many valuation opportunities in the consumer sectors. In this edition, we focus on which companies look most attractive based on their valuation relative to their expected profitability and how their estimates have fared.