18 Companies With Pricing Power in a Low-Inflation World

Morgan Stanley's research team had a interesting report out which highlighted companies that have pricing power in a low-inflation world. The firm asked each of their U.S. analysts to identify stocks from their coverage universe that they expected to exercise pricing power in the near- to medium-term as well as exhibit key indicators that would serve as evidence of that pricing power.

Below are the results:

American Tower (NYSE: AMT) - Towers are crucial for carriers seeking to add capacity / improve network quality. Contracts generally include annual escalators of 3%+.

Amgen (NASDAQ: AMGN) - We estimate HSD price increases across the portfolio in 2015; we expect mid-to-high-single-digit net pricing power to continue in 2016.

Biogen (NASDAQ: BIIB) - ~11-12% gross price increases across its portfolio in 2015 (we est. MSD net) and we would expect a similar net price trend in 2016.

Bristol-Myers Squibb (NYSE: BMY) - Good visibility for low/mid-single-digit price inflation, driven by high-value medicines; Opdivo will likely enrich the mix for next few years.

Celgene (NASDAQ: CELG) - In 2015, 7-10% gross price increases across its portfolio (MSD net, we estimate); we would expect a similar net price trend in 2016.

Comcast (NASDAQ: CMCSA) - We believe Comcast can grow residential ARPU by ~3%/yr near / medium term; NBCU should close its ‘monetization gap’ with peers.

Constellation Brands (NYSE: STZ) - We expect rational industry pricing; “halo” from higher-priced craft beers makes STZ’s Mexican import portfolio look more affordable.

Equinix (NASDAQ: EQIX) - Data centers in premium locations in global financial hubs; customers need to be in EQIX facilities to access key ecosystems.

Extra Space Storage (NYSE: EXR) - Pricing (rent growth) accelerating; for 2016 we expect 6% supported by evidence from our proprietary tracker.

L Brands (NYSE: LB) - Victoria's Secret and Bath & Body Works have shown 1-2% pricing growth annually for most of the past 5 years.

Mettler-Toledo Int’l (NYSE: MTD) - Mgmt expectation for 150bp/yr price increases look conservative, given our survey work and avg price increase of ~200bps/yr since ‘09.

MINDBODY (NYSE: MB) - Our diligence indicated strong value in the platform. Recent price increases should phase in as installed base works through renewals.

Philip Morris Int’l (NYSE: PM) - Our recent cigarette affordability deep dive suggests sustained visibility to 5%+ global pricing,

Reynolds American (NYSE: RAI) - Our study suggests a substantial pricing opportunity in US; in 2016, we expect RAI to continue to realize 4-5% underlying pricing.

Sally Beauty Holdings (NYSE: SBH) - Low avg ticket & basket size, and high private label mix, help SBH raise prices by nominal amounts without big impact on customers.

SBA Communications (NASDAQ: SBAC) - Towers are crucial for carriers seeking to add capacity / improve network quality. Contracts generally include annual escalators of 3%+.

Sherwin-Williams (NYSE: SHW) - Historically has shown the ability to maintain price despite declining raw materials costs and then reprice when raw materials reinflate.

Starbucks (NASDAQ: SBUX) - SBUX has said that it generally takes 1-1.5% pricing every year. We forecast FY16 SSS of 8% based on 4% ticket and 4% transaction

You May Also Be Interested In

• UBS Downgrades Toyo Suisan Kaisha Ltd. (2875:JP) (TSUKF) to Neutral
• Fed's Hammack warns of rate hikes if inflation persists
• Barclays Downgrades Air France-KLM (AF:FP) (AFLYY) to Underweight