Zacks Analyst Interview Highlights: Cadbury Schweppes, Altria, Del Monte Foods and Anheuser-Busch Companies.

CHICAGO -- Zacks.com releases the latest Analyst Interview. Today's interview is with senior analyst Steven Ralston, who discusses Cadbury Schweppes (NYSE: CSG), Altria (NYSE: MO), Del Monte Foods (NYSE: DLM) and Anheuser-Busch Companies (NYSE: BUD).

A synopsis of today's Analyst Interview is presented below. The full article can be read at http://at.zacks.com/?id=2678.

What is your top Buy at this time?

Cadbury Schweppes (NYSE: CSG) is my favorite Buy at this time. Despite a challenging cost environment, management was able to increase the operating margin by 30 basis points in 2005, an impressive feat in the Consumer Staples sector that has had many companies reporting disappointing results due to commodity cost pressures. Management has implemented two plans (the Fuel for Growth Plan and the Smart Variety Plan) in order to better focus the company and to improve margins. Non-core businesses, such as European Beverages, have been divested and the integration of its Adams Confectionery acquisition has been completed. With tangible operational improvement being demonstrated by the company's financial results, the stock is rated a Buy.

Do you have any Sells you'd care to mention?

The tobacco industry has had a couple of negative litigation developments within the last few months that seem to have put a ceiling on the stocks. In late March, the Supreme Court of the United States refused to hear an appeal in the Boeken case, in which a two-pack-a-day smoker who died of cancer was awarded a $50 million settlement. Therefore, Altria (NYSE: MO) paid the award despite the company's claim that the judgment is excessive. In addition, a California appeals court upheld a $28 million award against Philip Morris USA in a case of a smoker who died three years ago after she was diagnosed with lung cancer. The ruling includes punitive damages that are 33 times greater than the compensatory damage of $850,000.

These two rulings will entice lawyers to file additional suits against the tobacco companies in order to receive uncapped awards. As a result, the rating on Altria is a Sell. We maintain that rating despite the Supreme Court's decision on May 30th to hear the Williams case from Oregon, which involves an actual damage award of $821,485 plus $79.5 million in punitive damages.

What's your outlook for the second half of 2006 with the consumer non-durables group?

The next group rotation decision probably should occur in the fourth quarter when the Consumer Non-Durable companies traditionally outperform as some technology stocks pre-announce and disappoint near the end of the year. Consumer stocks, and especially food stocks, come into favor with their attributes of modest revenue growth and EPS growth bolstered by share repurchases. However, stock selection within the Consumer Staples sector will be key. Avoid food stocks with high debt levels, like Sell-rated Del Monte Foods (NYSE: DLM). Concentrate on high quality companies with relatively high dividend yields (at least over 2.5%) and low valuations, like Cadbury Schweppes and Anheuser-Busch Companies (NYSE: BUD).

Read the full interview at http://at.zacks.com/?id=2647.

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