Inflation headwinds and the Russia-Ukraine war pose "disproportionate risks" for this consumer products maker, according to Goldman Sachs. Analyst Jason English issued a double downgrade for Reynolds Consumer Products to sell from buy, saying in a Monday note to clients that risks of inflation and the war do not seem to be priced into the stock. Reynolds is the maker of kitchen consumer products, such as Reynolds aluminum foil and Hefty trash bags. "Importantly, we see disproportionate impact of these headwinds on REYN, with its elevated P & L [profit and loss] sensitivity to COGS [cost of goods sold] changes, and limited offsets ahead with price growth likely approaching potential thresholds and already downsized overhead expenses," English wrote. Goldman Sachs cut its 12-month price target on the stock to $26 per share from $34. The new price target represents 11.4% downside from where shares closed Monday. While Goldman said it is "impressed" with the company's positioning across its consumer goods categories, it believes management's EBITDA guidance and consensus estimates to be "too high" given rising commodity prices. They also expect headwinds from the Russia-Ukraine war will "likely be higher and more prolonged" than previously anticipated. "As a result, despite assuming further price growth ahead, we lower our EBITDA and EPS estimates and see significant downside relative to current consensus expectations," the note said. Shares for Reynolds dropped 2.9% in Tuesday premarket trading. —CNBC's Michael Bloom contributed to this report.
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Inflation headwinds and the Russia-Ukraine war pose "disproportionate risks" for this consumer products maker, according to Goldman Sachs.