8 Consumer Stocks With Multiple Analyst Upgrades In The Past Month

 |  Includes: ARO, CVS, IGT, K, LOW, PLCE, SIRI, SOHU
by: Rash Menaria

The following is a list of eight consumer stocks that have received two or more analyst upgrades in the past one month.


Company Name

Market Cap

No. of analyst upgrades in last one month


Aeropostale Inc.




Children's Place Retail Stores, Inc.




CVS Caremark Corporation




Lowe's Companies, Inc.




Sirius XM Radio Inc




Sohu.com Inc.




International Game Technology




Kellogg Company



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I believe Aeropostale and CVS Caremark can prove to be very good investment candidates for the medium- to long-term horizon.

Aeropostale, Inc. is a mall-based, specialty retailer of casual apparel and accessories, principally targeting 14-year-old to 17 year-old young women and men through its Aeropostale stores and 7-year-old to 12 year-old kids through its P.S. from Aeropostale stores.

For last 1.5-2 years, the company’s stock price has significantly underperformed its peers Abercrombie and Fitch (ANF) and American Eagle Outfitters (AEO). Aeropostale has lost its market share against these two companies and its gross margins have also been adversely affected. Investors in speciality teen space also slowly moved to Abercrombie and American Eagle, which appeared better companies.

However, things are changing now. Abercrombie recently reported poor earnings and negative same-store sales in flagship stores in international markets. Abercrombie for a long tome has been getting a premium multiple in the teen retail space, all thanks to its convincing international growth story. Now, with that story facing some serious roadblocks, investors are taking money away from Abercrombie and shifting to other companies.

Aeropostale appears to be a perfect choice. After over a year of negative earnings revisions, ARO’s 3Q11 pre announcement marks its first upward EPS revision since August 2010. The company significantly increased its Q3 2011 EPS guidance to $0.27-0.28 from $0.09-0.15 based on better gross margins than originally anticipated (by ~400bps). I believe it’s a very early phase of recovery for Aeropostale and the stock can go up significantly from current levels if it is able to contain its market share losses and improve its gross margins from current levels.

CVS Caremark is another interesting long candidate. CVS Caremark is a pharmacy healthcare provider in the United States. It provides pharmacy services through its pharmacy benefit management mail order and specialty pharmacy division, Caremark Pharmacy Services; approximately 7,000 CVS/pharmacy retail stores; retail-based health clinic subsidiary, MinuteClinic, and through its online pharmacy, CVS.com.

Pharmacy companies have a secular tailwind in the near to medium term due to the upcoming generics wave. When a drug goes off patent, it decreases sales volume for drug retailers as the drug is now selling at a lower price point. However, it increases profitability on a per script basis for drug retailers as there are multiple manufacturers and pharmacies have more leverage. In addition to the generics wave opportunity, CVS is likely to continue benefiting from the Walgreen (WAG)/ Express Scripts dispute and the Express Scripts (ESRX)/ Medco Health (MHS) merger. Walgreens recently acknowledged that its dispute with ESRX is adversely affecting its sales. CVS, the immediate competitor, is the most likely beneficiary.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.