For this homework, it has two parts, first part is do the excel, and then second part is after finish the excel then write paper. ( sample paper has attached) but you dont have to do the sample paper now, only do the excel first.
SBUX 2019 Student = previous excel hw
Take Home winter 2019 = requirement for the work
Sample P&G writeup = sample writing paper.
Fin 332 – Take Home Project for Starbucks
The second assignment is a take home project. I will allow you to work in groups of two if you choose. This is not required, meaning you may work alone as well. Given this is a take home, I expect you to work as if this were an in-class exam in terms of copying and/or sharing of information. You are NOT to work with others unless they are part of your 2-person team. You will abide by Drexel’s honesty code. If for ANY reason, I suspect sharing of information, all parties will receive a “0” on the exam or possibly fail the class. You will be reported to the Dean no questions asked. No project will be accepted unless you sign off on these terms.
If you delete any rows, change how I want the calculations to be constructed, change up the tabs, etc., you will lose ten points per change you make. Unfortunately, I have had too much experience with students copying in various different ways and therefore need to be VERY STRICT on this. In addition, you will be signing a full statement saying you have not in anyway shared or plagiarized information.
You have until Thursday, March7th at 11:59 pm to complete the exam. If I receive your work after the required time, you will receive a “0” for your grade. Late assignments WILL NOT be accepted. I am happy to give guidance on the projectbut will not sit with you while you complete each part of the exam. Office hours will be held Tuesday, March 5th from 2:30-5:00 pm and Thursday March 7th from 8:00 – 9:50 AM, 12- 3:00 pm. All work must be shown in excel (NO COPY AND PASTE VALUES unless part of forecasting) and all qualitative questions must be answered in a word document. If you choose to work in a group of two, only one excel file and one word document should be sent, with the names of your group on the email itself and the documents. Make sure you upload your work to the BBLearn icon in the week 9 folder as well as upload your word document to the turnitin icon in week 9. DO NOT give any definitions in your qualitative analysis unless specifically asked.
Our final objective is to take the information we analyzed in the first homework assignment and attempt to value Starbucks (SBUX)and determine if you shouldinvest in the stock today (3/7/19). Use the excel template provided to assess any historical and forecasted data.Most of your quantitative information will come from your calculations but if you have downloaded anything, i.e. ERP, it must be sourced appropriately (screen shots are typically sufficient and should be copied directly into excel). Forecasts, if they come from research, must also be sourced in footnotes and/or bibliography. Lack of sourcing results in point deductions (including 10K).
Quantitative Analysis(70 pts)
Qualitative Assessmentin a WORD document (30 pts)
Based upon our forecasts for P&G, we have placed a HOLD rating on the stock givenits current trading levels. Using the Exit Multiple, Key Driver, and FCF approaches we have projected a stock price for P&G in the $82 to $83 range indicating approximately a 5-6% drop in price from its current closing price of $87.25.
The most recent Q3 earnings call for PG did not meet our expectations. The company is still facing headwinds primarily due to foreign currency and competition. Sales in Q3 were slightly down (-1%) year-over-year, reflecting yet another quarter of negative revenue growth as P&G is restructuring its business to focus on key markets and sheds less profitable product categories. The divesture of 41 beauty brands to Coty Inc., which was completed in October 2016, negatively impacted overall revenue growth by 2 percentage points. However, the strongest negative contributor to revenue growth in the quarter was the Grooming segment, which presented a 6% drag on overall revenue growth due to unfavorable product mix (-4%) and challenging pricing (-2%). A bright spot was the Health Caresegment, which contributed 4% to net sales growth, driven by higher volumes. The results of Q3 are incorporated in our TTM, which has been a large determinant of our estimated sales growth for fiscal 2017.
As noted from PG’s CFO, a good year for PG is between 1-3% all-in sales growth and a great year 3-5% all-in sales growth. In terms of their current strategy, product innovation and repeat customers are key for PG’s developed markets especially the U.S. PG forecasted “organic sales growth for its U.S. market to be about 2% for the first half of FY 2017”. Internationally, PG sees China as its biggest opportunity with their growth drivers set on “premiumization of our brands, digital execution, transforming our Go-To Market, and dedicated category- customer organization”.
In PG’s FY 2017 guidance, foreign currency is expected to be “2-3% drag on the company’s all-in sales growth resulting in their expectation for FY 2017 to be flat”.We feel foreign currency is going to continue to be a headwind for PG due to the outlook of rising U.S. interest rates driving the strength of the USD. Internationally, China has become a concern due to PG losing market share in the country “primarily driven to the Baby Category”. Political unrest in Brazil and Venezuela along with trouble in economies that are dependent on oil makeus feel international sales growth will still be a challenge.Analyst research has reflected closer to 2-3% growth per year based on the full restructuring succeeding& emerging market pickup. We forecast PG can remain flat in ’17and adjusted down our future estimates due to foreign currency (as US interest rates are expected to continue to rise), softness internationally in sales, and industry /population growth trends. Our estimates are .40% in ‘17, 1.4% in ‘18, 1.9% in ‘19, 2.3% in ‘20, 2.7% in ‘21. (see segment for more detail)
Our sensitivity analysis most definitely had an impact on our investment decision, particularly when looking at WACC vs Growth. When WACC was above 6.5%,our decision would have changed from “Hold” to “Sell” in all growth cases. When WACC was 5.3% our decision would have changed from “Hold” to “Buy” in all growth cases. As we see more upside risk in WACC give current economic conditions, we stayed in the “Hold” camp unless the EV/EBITDA multiple dropped below 12.70 then we would have placed a “Sell” rating on PG.
The EV/EBITDA multiple we chose was13.2 implying a 2% growth rate. In comparison to Colgate-Palmolive which our speaker described as PG’s closest competitor, our 13.2 multiple is more conservative than Colgate’s multiple of 15.98. We feel 13.2 is a realistic assumption due to PG’s 5-year average being 13.21 and 13.2 being slightly in the middle between its median level EV/EBITDA multiple of 12.03 and it’s all time high of 14.28. This multiple also implied growth between 1.5-2% terminal growth which is in line with our assumptions.
 PG CAGNY 2017 Presentation
 PG 2016 Analyst Day Presentation
 PG Q3 2017 Earnings Presentation
 PG Q3 2017 Earnings Transcript
 PG 2016 Annual Report
 PG Q3 2017 Earnings Presentation
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