Zacks Analyst Interview Highlights: Cadbury Schweppes, Anheuser-Busch and Berkshire Hathaway.

CHICAGO -- Zacks.com releases the latest Analyst Interview. Today's interview is with senior analyst Steven Ralston, who discusses Cadbury Schweppes (NYSE: CSG), Anheuser-Busch Companies (NYSE: BUD) and Berkshire Hathaway (NYSE: BRK.A).

A synopsis of today's Analyst Interview is presented

Which companies do you consider your top Buy recommendations at this time, and why?

Cadbury Schweppes (NYSE: CSG) is my favorite Buy at this time. 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. The integration of the Adams Confectionery acquisition has been completed and has made the company become the global leader in confectionery, with a 9.9% market share. Also, Cadbury Schweppes sold its non-core European Beverages business in February 2006 and, subsequently, acquired the Dr. Pepper/7UP Bottling Group in the U.S. The strategy will not only generate cost and revenue synergies, but will also enhance the company's position in the U.S. beverage market. The acquisition is expected to be accretive to earnings in 2006.

In addition, management plans to spend another $200 million over the next two years acquiring additional independent bottling systems. With increased focus in the company's operations and tangible operational improvement being demonstrated in its financial results, the stock is rated a Buy.

Also Anheuser-Busch Companies (NYSE: BUD) continues to be attractive. Every few years, a distinctive investment opportunity occurs in the consumer non-durable sector. Generally speaking, a consumer company's earnings will flatten out or grow slowly, and consequently, the stock will pause in a trading range until the stock's P/E is compressed to an historic low. This process provides the investor the ability to buy a major brand name consumer franchise at a reasonable price. Anheuser-Busch, the world's largest brewer with a dominant 49% U.S. market share, fits this profile.

However, this distinctive investment opportunity did not go unnoticed. Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) acquired a significant ownership stake in the company. Also Anheuser-Busch Companies reported its second consecutive positive earnings surprise in the third quarter. A favorable beer pricing environment, coupled with the company's increased focus on reducing costs and enhancing productivity, offset higher production and packaging costs. Low valuation coupled with the company's trend in reporting positive earnings surprises is the sweet spot in looking for a timely equity investment.

Looking forward to 2007, what's "in store" for food and beverage stocks, in your opinion?

The Consumer Staples sector has been outperforming since April this year, discounting the economy's de-acceleration. The slowdown is best exemplified by the lower second quarter growth rate of the Gross Domestic Product (GDP), the sum of all goods and services produced in the U.S. GDP only rose at an annual rate of 2.2% during the third quarter, slower than the 2.6% pace during the second quarter, and much slower than 5.6% in the first quarter. Drilling down, consumer spending, which accounts for more than two-thirds of the economy, has also slowed, having expanded only 3.1% in the third quarter versus the 4.8% gain in the first quarter.

In this environment, the Consumer Staples sector has traditionally performed better than the stock market. The fundamental explanation is that food, beverage, household products and cosmetics companies manufacture and market brand name consumable products, most of which are considered essential to daily life, such as food, drink, toothpaste, deodorants, toilet paper, etc. Since product demand is relatively stable, the companies tend to report earnings in line or above expectations.

We expect the outperformance of the sector to continue as the economy slows. The consumer stocks are still far away from valuation highs and have room for multiple expansion. In general, when stocks in the Consumer Staples sector begin to outperform after a multi-year period of languishing or basing, the stocks tend to continue to outperform for three years.

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

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