2023.04.24 4,300 points to be the resistance

The National Association of Realtors (NAR) announced that existing-home sales growth in March turned negative, down 2.4% YoY, lower than the expectation of a 1.8% decline. According to the Labor Department, for the week ended 15th April, the number of initial jobless claims rose by 5,000 to 245,000, and the four-week moving average was 239,750, a decrease of 500 from the prior period. Continuing claims increased by 61,000 in the week to 1.865 mn, above the consensus of 1.82 mn, and the highest since November 2021. The figures show that the labor market is softening with rising interest rates and a slowing economy.

For the US economy itself, the market believes inflation to still be under pressure and the risk of inflation is increasing. Cleveland Fed President Loretta Mester said on 20th April that interest rates need to rise above 5% given persistent inflation, but the magnitude will depend on economic and financial conditions. It is expected that Fed will hike rates at the policy meeting in May, lifting its policy rates by 0.25% to 5.00%-5.25% and end this round of interest rate hikes. We expect the market to continue to focus on the Fed meeting in May. Given the lack of investment themes, gold prices are expected to outperform other investment products. As the market remains uncertain, we expect the S&P 500 index to trade between 4,000 and 4,300 points.

In terms of industries, US consumption is still resilient and can support the consumption sector. Investors can pay attention to related companies with outstanding performance.

Coca-Cola (KO)’s FY22 annual revenue was US$43.004 bn, +11.24% YoY; operating profit was US$10.909 bn, +5.83% YoY; GAAP net profit was US$9.54 bn, -2.34% YoY; EPS was US$2.19, -3.1% YoY. In FY22, the company’s GPM was 58.6%.

The company cooperates with multiple bottlers, maintains a high gross profit margin. The company continues to optimize the supply chain, and also improve production capacity and competitiveness. The company focuses on “full-category beverages” and expands to more products. For instance, the company’s drinking water brand Smartwater has been introduced to the Chinese market in 3Q22. In FY23, the company is expected to open more packaging factories in Asia to advance its global layout and will launch more packages of different sizes. In addition, the company is enriching the product categories and is developing new brands. Mgmt will focus on the inflation rate to adapt to market changes. It is recommended to buy at US$62.1, target at US$72.4, and stop loss at US$60.2.

Campbell Soup (CPB) is a leading manufacturer and marketer of instant foods. In 2022, the company’s revenue was US$8.562 bn, +1.01% YoY; adjusted net profit was US$0.86 bn, -4.65% YoY. Driven by the rebranding of traditional cans and AI innovation being applied to products, the company’s FY23 revenue is expected to reach US$9.326 bn, +8.92% YoY.

By combining AI technology with its products, the company has strengthened product innovation and built new platforms so that products can be launched a lot faster. These products include Pepperidge Farm Goldfish Frank’s RedHot Spicy Crackers, Spicy Sirloin Burger Soup and Prego Spicy Spaghetti Sauce. Mgmt believes that innovation is the potential driver in the future. Looking ahead, mgmt expects price hikes with supply chain issues to improve, and revenue in FY23 is expected to increase by 8.5% to 10%, which is higher than the previous expectation of 7% to 9%. Adjusted EPS is expected to reach US$2.95-3, higher than the previous forecast of $2.9-3. It is recommended to buy at US$52.0, target at US$60.6, and stop loss at US$50.4.