RBC’s Modi: this consumer staple stock is a good pick for 2022

Consumer staples tend NOT to do good in times of inflation, but one that will still outperform next year is the Coca-Cola Co (NYSE: KO), says RBC Capital Market’s Nik Modi.

Highlights from Modi’s interview on CNBC’s ‘The Exchange’

Modi rates KO at “buy” with a price target of $64 that represents an over 10% upside from here. Defending his bullish call on CNBC’s “The Exchange”, he said:

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Coke has done a restructuring, which really realigned how they make decisions within the company. We think that is going to materialise into better top-line performance as we move into 2022.

The expert sees mobility improving next year despite the ongoing concerns related to the heavily mutated Omicron variant of the Coronavirus, which could be another catalyst for KO considering it generates more than 50% of its business from “away from home channels”.

Last week, activist SOC Investment Group warned Coca-Cola must not renominate Activision CEO to the board. KO is up nearly 10% this year.

Modi’s essential ingredient to pick up stocks for 2022

For 2021, Modi had Mondelez as his top idea, which is on track to close the year with an over 10% gain. Another reason he likes Coca-Cola for next year is that the beverage giant has pricing power. He added:

Pricing power is a key factor that’s going into how we’re picking stocks for 2022. Every company that I cover has taken price increases, some have taken two to three rounds of price increases, and I would expect that will continue in early 2022.

Earlier this week, the U.S. Federal Reserve signalled three rate hikes in 2022. According to the RBC analyst, it could be a boon for Coca-Cola since staples usually outperform when “rates go up aggressively.”