These Food Stocks Are Defying Industry Woes
Challenging industry trends
Packaged food manufacturers had a rough year in 2016, and 2017 is looking no different. Weak volumes in the US, due to the consumer shift toward healthy food and continued low prices of fresh foods, are affecting the top-line performances of these companies.
The rise of private label brands and the price war among retailers are meanwhile expected to create more challenges by squeezing margins. Our select group of food stocks below has also underperformed the S&P 500 Index (SPX-INDEX) and the Consumer Staples Select Sector SPDR ETF (XLP), which have risen 11.5% and 7.3%, respectively, YTD (year-to-date).
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During the same period, Campbell Soup (CPB), J. M. Smucker (SJM), Conagra Brands (CAG), General Mills (GIS), Kellogg (K), Mondelēz (MDLZ), and Kraft Heinz (KHC) stocks have risen 21.0%, 15.3%, 12.8%, 10.9%, 8.3%, 8.2%, and 6.9%, respectively.
Amid these challenges, three food stocks are defying the current industry gloom and are expected to report balanced top- and bottom-line growth in coming quarters.
McCormick (MKC) continues to generate healthy sales and EPS (earnings per share) through its renowned portfolio of market-leading brands. MKC’s strategic acquisitions are expected to boost its product pipeline and generate incremental sales and margin growth. McCormick stock has risen 5.5% YTD as of September 14, 2017.
Hershey (HSY) has been performing consistently, despite the sluggish sales environment. Its iconic brands, ability to increase prices, innovation-based product pipeline, in-store display activity, and cost-control measures are expected to drive the company’s sales and profitability. Hershey stock is up about 5.7% YTD.
Tyson Foods (TSN) is also witnessing strong sales growth, driven by improved volumes across all its business segments. Favorable market conditions, including rising consumption and ample supply of livestock, are expected to drive the company’s financials going forward.