Why Food Stocks Aren’t Cooking
So far this year, food stocks have largely disappointed investors, and the outlook for the rest of the year appears no better. Stock prices for food manufacturers have been on a downtrend, underperforming the S&P 500 Index (SPX-INDEX) on a YTD (year-to-date) basis, as the graph below shows. As of July 3, Campbell Soup (CPB), General Mills (GIS), Conagra Brands (CAG), J. M. Smucker (SJM), Kellogg (K), and Kraft Heinz (KHC) have fallen 13.7%, 10.7%, 10.2%, 7.7%, 6.7%, and 3.3%, respectively, YTD. The S&P 500 Index has returned 8.5% during the same period.
During the week ended June 23, 2017, orange juice futures, or FCOJ-A near-month futures prices, ended in negative territory week-over-week.
On average, cotton futures traded lower week-over-week for the week ended June 23, 2017.
In the week ended June 23, 2017, the near-month futures for Sugar No. 11 and No. 5 contracts trended downward, a pattern observed since the beginning of this year.
Cocoa prices for the week ending June 23 ended in negative territory in the US and London.
In this series, we’ll explore the price movements of five soft commodities—coffee, sugar, cocoa, orange juice, and cotton. Arabica coffee, which is considered superior in flavor and quality to Robusta coffee, has seen its futures price falling during the past six months.
Last week (ended June 16), FCOJ-A front-month futures in the US rose to $1.41 per pound from $1.39 per pound one week previously.
Last week (ended June 16), cocoa front-month futures in the US fell to $1,977 per metric ton from $2,028 per metric ton one week previously.
Last week, front-month sugar No. 11 futures closed at 13.4 cents per pound, falling week-over-week from 14.3 cents per pound one week previously.
Arabica front-month futures hit a fresh low last week (ended June 16), falling to $1.24 per pound from $1.26 per pound one week previously.
Hershey (HSY) is slated to report its 1Q17 results on Wednesday, April 26.
In the past three fiscal years, McCormick has returned more than $1.0 billion to its shareholders in the form of dividends and share buybacks.
Despite a slow-growth scenario in the food industry, McCormick has driven sales through strategic acquisitions and price restructuring.
McCormick stock has risen about 7.2% YTD as of April 6, 2017, reflecting the company’s ability to drive sales despite a softness in the industry.
As of March 24, 2017, Conagra Brands (CAG) was trading at a 12-month forward PE (price-to-earnings) ratio of 21.9x.
About 64.0% of analysts covering Conagra (CAG) have recommended a “buy” for the stock, and 29.0% have recommended a “hold.”
Conagra Brands’ (CAG) adjusted gross margin expanded in fiscal 3Q17, despite lower sales and gross profit dollars.
Conagra Brands’ (CAG) business segments saw volumes fall due to its planned exit from several underperforming products.
Conagra Brands’ (CAG) fiscal 3Q17 sales of $1.98 billion fell marginally short of Wall Street’s expectations of $1.99 billion.
Conagra Brands’ (CAG) fiscal 3Q17 EPS topped analysts’ estimates. But sales fell again YoY and missed Wall Street analysts’ consensus estimate.