Goodbye, bye Red No. 3. That puts pressure on inventories in an already battered industry. “Whether it’s justified or not, we believe consumers’ renewed focus on the role of processed foods in the public health crisis is just beginning. It’s hard to see how big food companies can invest so much in convenience, indulgence and cost. . Donald Trump appoints vaccine skeptic Robert F. Kennedy Jr. as health and human services secretary. If confirmed by the Senate, Kennedy will oversee major health and social services organizations. and influence health policy and food regulations. He criticized additive-laden processed foods as well as seed oils and fluoridated water. Although some of his views remain controversial, his stance on processed foods appears to be strengthening. “Make America Healthy Again.” “The voices are getting louder and louder. It’s unclear how Kennedy will prioritize his agenda, but food industry analysts expect pressure to increase on an industry already struggling with slow growth, shrinking consumer budgets and changing eating habits. Investors must choose stocks that are nimble enough to adapt or already sell more nutritious products. Moskow expects it will be “relatively easy” to remove Red 3 from food and expects any increased costs to be offset elsewhere. This strategy can be repeated if additional bans arise. However, analysts expect the greater threat is that MAHA initiatives will increase, fomenting consumer distrust and “potentially eroding brand value.” Tough Two Years Food stocks are coming off their worst two years compared to the S&P 500 since 2017-2018. However, a rebound is possible as these stocks trade at significant price-to-earnings discounts to the broader index. Evercore ISI analyst David Palmer wrote in a recent note to clients: “Following a two-year stretch from 2017 to 2018, food stocks gained 27% in 2019 as sales trends stabilized and negative earnings revisions declined.” As we enter 2025, we recognize the potential for stabilizing volumes as consumers adjust to COVID-era inflation and as inflation eases ahead of the election. Palmer’s top picks are Post, Mondelez and BellRing Brands. But he remains cautious because multi-year trends in the industry suggest organic sales in North America could decline an average of 3% in the first quarter and 1% in the second quarter. As consumers look to save money, large national food brands are losing market share to private labels, he said, with store brand sales growing about 4% to 5% from 2023 to 2024. Double-digit growth. In November, the company forecast fiscal 2025 revenue to grow 12% to 16% to $2.24 billion to $2.32 billion, which should be the case since the brand’s household penetration is only 19%. Continue. Awareness should increase as distribution expands and advertising spending increases, further boosting sales. Increased use of GLP-1 drugs for obesity treatments could have an impact on companies like BellRing. Positive Boost. Protein shakes are considered a good option for people who want to lose weight, especially those taking appetite-suppressing GLP-1 medications such as Wegovy and Zepbound. These patients are encouraged to continue consuming protein. To avoid muscle mass loss. Three-quarters of analysts covering BellRing have a strong buy or overweight rating on the stock, with the stock potentially rising 16% from Friday’s closing price, according to FactSet. Shares are up 36% in 2024. BRBR 1Y mountain Bellring Brands stocks over the past year. Bernstein analyst Alexia Howard said cheap valuations in the food industry may attract investors, but they will need to overcome a hit to GLP-1 drug sales or Concerns about avoiding highly processed foods. There are early signs that consumers are adjusting their behavior due to growing concerns about potential links between food choices and MAHA-related chronic health conditions. She cited as examples heightened concern about the levels of heavy metals in some foods and growing concerns about plasticizers and microplastics that may be transferred into food through packaging. As for GLP-1 drugs, the biggest impact won’t be immediately apparent, she said. Bernstein estimates that 15% of U.S. adults will use these drugs within the next four to five years, reducing calorie consumption by about 1% per year for the next several years. Still, packaged foods, especially sweet and salty snacks, will be “disproportionately affected,” Howard said. Howard’s first-choice players tend to have healthier profiles. These include Atkins and Quest brand owner Simply Good Foods, leading organic and natural food manufacturer Hain Celestial and ingredients giant McCormick. MKC 1Y mountain McCormick & Co.’s share price over the past year Evercore notes that McCormick’s stock tends to benefit as more people cook at home, with the company’s stock up 11% in 2024 from the previous year, making it a America’s only large-cap food stock. But Wall Street has a more mixed view on the stock, with just over a third of analysts rating the stock a “buy” or “overweight,” according to FactSet data. Most think it’s worth holding, but the average analyst price target of $85.65 suggests the stock could rise nearly 17% over the next year. The desire for a product portfolio with the right products may encourage more M&A. Take Campbell Soup’s acquisition of Rao’s owner Sovos in March, for example. Fans of this fast-growing ketchup brand love that it has no added sugar. Like many other healthier options, Rao’s is priced higher than brands like Campbell’s-owned Prego. Rob Dongoski, partner and global head of Kearney’s food and agribusiness practice, told CNBC that consumers are increasingly falling into two categories. More and more people “care about what they eat and are willing and able to pay for it,” he said. Still others won’t change their habits due to budget constraints or lack of interest. “The successful food companies of the future will carve out their own niche markets,” he said. “They’re going to figure out, can I serve both, or am I going to double down on one or the other. I think that’s the key.” He expects big food companies to make that decision and look at their product portfolios, Either realign the brand to fit the strategy or go out and make acquisitions. Active investors can also encourage more deals, Bernstein’s Howard said. “There’s also a broader question of whether activists can push for greater consolidation across the space, perhaps to try to finish what 3G started when Kraft merged with Heinz in 2015,” Howard said. She noted that there are many A viable combination as the deals would allow the company to cut costs and increase its negotiating leverage with retailers. Howard identified Simply Good Foods, with its nutrition bars and protein shakes, as the “most likely delivery candidate” in her coverage. SMPL 1Y mountain Simply Good Foods Stock Over the Past Year Most analysts rate Simply Good a Buy or Overweight, with an average price target of $40.90, which would provide over 20% upside over the next year. But the stock’s performance has been weak. The company’s stock price fell in late 2024 and has fallen 13% in the first few weeks of 2025. Additionally, the company recently acquired Owyn, a plant-based protein shake, which should boost sales. “Stable (Not Nervous) Dividends” For those who decide to invest in food stocks, pay attention to dividends. Savita Subramanian, equity and quantitative strategist at Bank of America, said Thursday that if investors believe the market has entered a “total return world,” dividends will become even more important in a portfolio. Important, as “sublime” share price returns may become even more important. “We recommend investors look for companies with dividend yields that are above the market and stable (but not excessive),” she wrote in a research note Thursday. Many food stocks fit the bill, including General Mills, Holland America Er, Campbell’s Soup, Pepsi-Cola and Tyson Foods. Subramanian said the group complies with the valuation principle of “buy low, sell high” and the stock price appreciation may exceed dividend growth. “Since 1990, value stocks have led the way in both recovery (low P/E stocks outperformed 100% of the time) and downturn quality (return on equity),” she writes. “Portfolios may dominate in 2025, but cheap quality stocks are rare – after two decades of high quality trading at a discount, high and low quality stocks are now equally valued.”
Buy these food stocks to avoid risk | Real Time Headlines
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