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JPMorgan Likes Pepsi, Caterpillar as Supply Chain Woes Ease

The analysts note that the S&P 500 already has reached their year-end price target of 4,700.
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Supply chain disruption is starting to wane, says JPMorgan Chase, and among those stocks that will benefit are PepsiCo  (PEP) - Get PepsiCo, Inc. Report, Caterpillar  (CAT) - Get Caterpillar Inc. Report, Schlumberger  (SLB) - Get Schlumberger NV Report and FedEx  (FDX) - Get FedEx Corporation Report.

“Global supply chain pressures are easing — if this persists, the S&P 500 should continue to deliver strong revenue growth and record margins,” JPMorgan analysts, led by Chief U.S. Equity Strategist Dubravko Lakos-Bujas, wrote in a commentary.

“S&P 500 companies delivered much stronger-than-expected results [for earnings in the third quarter] … and some key companies gave an encouraging outlook on supply chains.

“Our view all along has been that supply and labor shortages would be temporary and normalize with a decline in Covid-19.”

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Further, “In recent months, we have argued that the supply chain headwind to S&P 500 earnings would be minimal, given its lower asset and labor intensity,” the strategists said.

“We believe other market segments are more levered to a supply chain recovery than the S&P 500 (e.g. Europe over the U.S., small-caps over mega-caps, goods-producing sectors over tech and healthcare).”

The analysts note that the S&P 500 already has reached their year-end price target of 4,700. As previously mentioned, “we expect the market to … reach 5,000 in the first half of 2022, assuming supply chains and Covid-19 continue to normalize.”

Among other stocks that J.P. Morgan favors on the supply chain theme are Walmart  (WMT) - Get Walmart Inc. Report

Johnson & Johnson  (JNJ) - Get Johnson & Johnson Report, Amazon  (AMZN) - Get Amazon.com, Inc. Report, Twitter  (TWTR) - Get Twitter, Inc. Report, Nvidia  (NVDA) - Get NVIDIA Corporation Report, Texas Instruments  (TXN) - Get Texas Instruments Incorporated Report, Kimberly-Clark  (KMB) - Get Kimberly-Clark Corporation Report, Cummins  (CMI) - Get Cummins Inc. Report, Estee Lauder  (EL) - Get Estee Lauder Companies Inc. Class A Report, Royal Caribbean Cruises,  (RCL) - Get Royal Caribbean Group Report, Coca-Cola  (KO) - Get Coca-Cola Company Report and United Parcel Service  (UPS) - Get United Parcel Service, Inc. Class B Report.

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