Credit Suisse has asked its research analysts to identify their top stock picks for the next six to 12 months, in a report dated May 5. With a pickup in consumer spending being forecast for the second quarter, investors may want to pay particular attention to Credit Suisse's favored companies in this sector. (For more, see also: Start Your Engines: Why GDP Will Fire Up in Q2.)

These five consumer stocks recommended by Credit Suisse look especially interesting to Investopedia at this time: department store Nordstrom Inc. (JWN), soft drink and snack food giant PepsiCo Inc. (PEP), fast-food franchisor McDonald's Corp. (MCD), coffee and donuts franchisor Dunkin' Brands Group Inc. (DNKN) and upscale grocer Whole Foods Market Inc. (WFM).

Nordstrom

Credit Suisse rates Nordstrom "best in breed" among department stores. In addition to offering top branded merchandise at full price through its flagship Nordstrom stores sales channel, the company also is succeeding in reaching a price-sensitive clientele through its off-price, deep-discount Nordstrom Rack stores. Moreover, CS credits Nordstrom with leveraging its ecommerce investments at a faster pace than its peers, exercising tight control over inventories, and emphasizing speed to market with new styles. CS gives the stock a target price of $52; it closed Monday at $48.70. (For more, see also: Nordstrom Gets New CFO.)

PepsiCo

PepsiCo's Frito-Lay division is a "best in class" purveyor of snack foods in Credit Suisse's opinion, which notes its dominant position along retail shelf space. Additionally, CS notes that the company has been quick to recognize the growth of demand for noncarbonated beverages, and to capitalize on it. Moreover, PepsiCo now derives about 45% of its net revenue from "guilt-free" products, such as beverages with less than 70 calories per 12 ounces and snack foods with reduced salt and fat content, per a Reuters report reprinted by Business Insider. CS has a target price of $124 for the stock; it closed Monday at $113.22.

McDonald's

Operational improvements leading to increased profit margins and returns on invested capital drive Credit Suisse's recommendation of the stock. CS also points to menu enhancements such as antibiotic-free chicken nuggets. CS has a target price of $157 on the stock; it opened Monday at $144.24. (For more, see also: Huge Q1 Earnings Beats Will Send These Stocks Higher.)

Dunkin' Brands

The company continues to open new franchised locations at a steady pace (about 4% annually) as it moves its geographic footprint westward, and this expansion is the key driver of free cash flow and valuation, Credit Suisse says. CS also notes that Dunkin' is potentially a big winner from corporate tax reform, since it pays at a rate of about 38%, well over the 32% average for restaurant chains. Dunkin' also is the subject of buyout rumors, according to financial news site The Fly. CS has a $61 target price for the stock; it closed Monday at $54.77.

 

 

Whole Foods

Whole Foods has been upgraded in rank since the April edition of the Credit Suisse report on Top Picks. The company is a turnaround or acquisition play, with hedge fund JANA Partners LLC taking an active role in trying to enhance shareholder value through either route. CS thinks that the market is underestimating the possibility of a sale, even though Whole Foods already is up sharply this year on buyout speculation. First quarter earnings are scheduled to be released after the market close on May 10, and analysts are expecting a decrease from the same period last year, according to Nasdaq.com.

Meanwhile, CS also sees a number of value-enhancing trends already underway, such as lower prices, lower costs, slower addition of new locations, accelerating sales of house brands, investments in marketing and technology, and streamlined category management. CS has a $40 target price for the stock; it closed Monday at $36.71.

 

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