We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Zacks Industry Outlook Highlights General Mills, Conagra Brands, J. M. Smucker and Lamb Weston Holdings
Read MoreHide Full Article
For Immediate Release
Chicago, IL – November 17, 2022 – Today, Zacks Equity Research discusses General Mills, Inc. (GIS - Free Report) , Conagra Brands, Inc. (CAG - Free Report) , The J. M. Smucker Co. (SJM - Free Report) and Lamb Weston Holdings, Inc. (LW - Free Report) .
Players in the Zacks Food-Miscellaneous industry are grappling with the elevated cost of inputs, packaging and logistics, which are likely to persist. A tight labor market has also been making things difficult. Additionally, soft volumes and adverse currency movements have been posing concerns for some companies.
Nevertheless, food companies have been undertaking necessary pricing actions and streamlining operational structures to battle inflation. Further, focus on innovation, product upgrades and portfolio refinement to cater to consumers’ altering tastes and preferences has been working well for companies like General Mills, Inc., Conagra Brands, Inc., The J. M. Smucker Co. and Lamb Weston Holdings, Inc.
About the Industry
The Zacks Food-Miscellaneous industry consists of companies that manufacture and sell a wide range of food and packaged food items such as cereals, flour, sauces, bakery items, spices and condiments, natural and organic food items as well as frozen products. Some of the companies also provide comfort food items such as chocolates and ready-to-serve meals, soups and snacks. A few players are engaged in providing pet food products and supplements.
Several food companies also offer organic and natural products. The companies operating in this space sell their products mostly through wholesalers, distributors, large retail organizations, grocery chains, mass merchandisers, drug stores as well as e-commerce service providers. Some also cater to foodservice channels, including restaurants, cafes and hotels. Others offer services to schools, hospitals and industry caterers.
Major Trends Shaping the Future of the Food Industry
Rising Costs: Food players have been encountering input cost inflation for a while now. A number of the companies, in their last earnings releases, stated that they expect input costs to remain high in the near term. We note that prices of commodities like soybean, flour, cooking oil, vegetables, dairy items and animal feed, among others, have been rising.
Apart from this, supply-chain hurdles have increased warehouse, packaging and other logistics expenses. The rise in these expenses, along with a tough labor market, has been plaguing margins. That said, companies have been focused on undertaking initiatives to mitigate cost-related challenges. These include streamlining operational structures, optimizing manufacturing capacity and supply networks as well as adopting effective pricing policies.
Volume Concerns: Some companies are also battling soft volumes due to lower shipments of products. Certain companies are expecting sales volumes to remain hampered in the near term due to production and throughput constraints stemming from disruptions in the availability of key product inputs and spare parts.
Adverse Currency Movements: A number of companies remain vulnerable to unfavorable currency movements due to their exposure to international markets. This is because a strengthening U.S. dollar may require a company to either raise prices or contract profit margins in locations outside the United States. Some industry players, such as General Mills and Conagra Brands expect unfavorable currency fluctuations to affect their performances in the current fiscal year.
Refining Portfolio to Suit Consumer Needs: Food companies have been taking to product upgrades and innovations on a regular basis to cater to consumers’ changing tastes and preferences. Moreover, with health and well-being gaining importance amid the pandemic, there has been growth in demand for organic and natural food offerings. A number of miscellaneous food companies are enriching their portfolio by adding more plant-based and natural brands. Additionally, companies often engage in portfolio refinement through strategic buyouts and divestiture of non-core elements.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Food-Miscellaneous industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #131, which places it in the bottom 48% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. Since the beginning of May 2022, the industry’s earnings estimate for 2022 has declined 8.8%.
Let’s take a look at the industry’s performance and current valuation.
Industry Vs. Broader Market
The Zacks Food-Miscellaneous industry has outperformed the S&P 500 and the broader Zacks Consumer Staples sector over the past year.
The industry has risen 2.3% over this period against the S&P 500’s decline of 17.2%. Meanwhile, the broader sector has dropped 5.1% in the said time frame.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing consumer staples stocks, the industry is currently trading at 17.83X compared with the S&P 500’s 17.5X and the sector’s 18.61X.
Over the past five years, the industry has traded as high as 20.6X and as low as 15.08X, with the median being at 18.03X.
4 Food Stocks to Keep a Close Eye On
Lamb Weston: This value-added frozen potato products company has been gaining from pricing actions in the core business segments to counter input, manufacturing and transportation cost inflation. In addition, Lamb Weston has been keen on boosting production capacity to fuel long-term growth. The consensus mark for current fiscal year sales suggests growth of 14.6% from the year-ago period reported figure.
The Zacks Consensus Estimate for Lamb Weston’s current financial year's EPS has jumped 8.6% over the past 60 days. LW has a long-term earnings growth rate of 26.9%. Shares of this Zacks Rank #1 (Strong Buy) company have rallied 38.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
General Mills:The manufacturer and marketer of branded consumer foods has seen its shares rise 22.7% in the past year. The Zacks Consensus Estimate for General Mills’ current financial-year earnings per share (EPS) has moved up by 2.3% over the past 60 days. GIS has a trailing four-quarter earnings surprise of 6.1%, on average. The consensus mark for current fiscal year sales suggests growth of 2.7% from the year-ago period reported figure. GIS has a long-term earnings growth rate of 7.5%.
General Mills has been gaining from its Accelerate strategy, which is highlighted by its key priorities. These include competing efficiently, investing in Holistic Margin Management and Strategic Revenue Management initiatives and reshaping the portfolio. The company is also gaining from its Pet unit. Apart from this, General Mills’ saving and pricing actions have been aiding it amid cost headwinds. GIS currently carries a Zacks Rank #2 (Buy).
Conagra Brands: Constant focus on innovation as well as a recovery in the Foodservice business is working well for Conagra. Also, the consumer-packaged goods food company is on track with robust pricing actions in the face of increasing cost of goods sold inflation. Conagra has a long-term earnings growth rate of 6%. The consensus mark for current fiscal year sales suggests growth of 5.2% from the year-ago period reported figure.
This Zacks Rank #2 stock has risen 8.1% in the past year. The Zacks Consensus Estimate for CAG’s current financial-year EPS has risen by 0.8% over the past 60 days.
The J. M. Smucker Company: This Zacks Rank #2 stock has jumped 9.9% in a year’s time. The manufacturer and marketer of branded food and beverage products has been gaining on higher at-home consumption, especially for coffee. Strength in the Away from Home division and efficient pricing have also been upsides for The J. M. Smucker Company. SJM’s investments in growth areas like Uncrustables and Dunkin' brands bode well.
The Zacks Consensus Estimate for The J. M. Smucker Company’s current financial-year EPS has remained stable over the past 30 days. SJM has a long-term earnings growth rate of 2.8%. The consensus mark for current fiscal year sales suggests growth of 4.5% from the year-ago period reported figure.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Industry Outlook Highlights General Mills, Conagra Brands, J. M. Smucker and Lamb Weston Holdings
For Immediate Release
Chicago, IL – November 17, 2022 – Today, Zacks Equity Research discusses General Mills, Inc. (GIS - Free Report) , Conagra Brands, Inc. (CAG - Free Report) , The J. M. Smucker Co. (SJM - Free Report) and Lamb Weston Holdings, Inc. (LW - Free Report) .
Industry: Food
Link: https://www.zacks.com/commentary/2018731/4-delectable-food-stocks-worth-a-shot-despite-cost-woes
Players in the Zacks Food-Miscellaneous industry are grappling with the elevated cost of inputs, packaging and logistics, which are likely to persist. A tight labor market has also been making things difficult. Additionally, soft volumes and adverse currency movements have been posing concerns for some companies.
Nevertheless, food companies have been undertaking necessary pricing actions and streamlining operational structures to battle inflation. Further, focus on innovation, product upgrades and portfolio refinement to cater to consumers’ altering tastes and preferences has been working well for companies like General Mills, Inc., Conagra Brands, Inc., The J. M. Smucker Co. and Lamb Weston Holdings, Inc.
About the Industry
The Zacks Food-Miscellaneous industry consists of companies that manufacture and sell a wide range of food and packaged food items such as cereals, flour, sauces, bakery items, spices and condiments, natural and organic food items as well as frozen products. Some of the companies also provide comfort food items such as chocolates and ready-to-serve meals, soups and snacks. A few players are engaged in providing pet food products and supplements.
Several food companies also offer organic and natural products. The companies operating in this space sell their products mostly through wholesalers, distributors, large retail organizations, grocery chains, mass merchandisers, drug stores as well as e-commerce service providers. Some also cater to foodservice channels, including restaurants, cafes and hotels. Others offer services to schools, hospitals and industry caterers.
Major Trends Shaping the Future of the Food Industry
Rising Costs: Food players have been encountering input cost inflation for a while now. A number of the companies, in their last earnings releases, stated that they expect input costs to remain high in the near term. We note that prices of commodities like soybean, flour, cooking oil, vegetables, dairy items and animal feed, among others, have been rising.
Apart from this, supply-chain hurdles have increased warehouse, packaging and other logistics expenses. The rise in these expenses, along with a tough labor market, has been plaguing margins. That said, companies have been focused on undertaking initiatives to mitigate cost-related challenges. These include streamlining operational structures, optimizing manufacturing capacity and supply networks as well as adopting effective pricing policies.
Volume Concerns: Some companies are also battling soft volumes due to lower shipments of products. Certain companies are expecting sales volumes to remain hampered in the near term due to production and throughput constraints stemming from disruptions in the availability of key product inputs and spare parts.
Adverse Currency Movements: A number of companies remain vulnerable to unfavorable currency movements due to their exposure to international markets. This is because a strengthening U.S. dollar may require a company to either raise prices or contract profit margins in locations outside the United States. Some industry players, such as General Mills and Conagra Brands expect unfavorable currency fluctuations to affect their performances in the current fiscal year.
Refining Portfolio to Suit Consumer Needs: Food companies have been taking to product upgrades and innovations on a regular basis to cater to consumers’ changing tastes and preferences. Moreover, with health and well-being gaining importance amid the pandemic, there has been growth in demand for organic and natural food offerings. A number of miscellaneous food companies are enriching their portfolio by adding more plant-based and natural brands. Additionally, companies often engage in portfolio refinement through strategic buyouts and divestiture of non-core elements.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Food-Miscellaneous industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #131, which places it in the bottom 48% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. Since the beginning of May 2022, the industry’s earnings estimate for 2022 has declined 8.8%.
Let’s take a look at the industry’s performance and current valuation.
Industry Vs. Broader Market
The Zacks Food-Miscellaneous industry has outperformed the S&P 500 and the broader Zacks Consumer Staples sector over the past year.
The industry has risen 2.3% over this period against the S&P 500’s decline of 17.2%. Meanwhile, the broader sector has dropped 5.1% in the said time frame.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing consumer staples stocks, the industry is currently trading at 17.83X compared with the S&P 500’s 17.5X and the sector’s 18.61X.
Over the past five years, the industry has traded as high as 20.6X and as low as 15.08X, with the median being at 18.03X.
4 Food Stocks to Keep a Close Eye On
Lamb Weston: This value-added frozen potato products company has been gaining from pricing actions in the core business segments to counter input, manufacturing and transportation cost inflation. In addition, Lamb Weston has been keen on boosting production capacity to fuel long-term growth. The consensus mark for current fiscal year sales suggests growth of 14.6% from the year-ago period reported figure.
The Zacks Consensus Estimate for Lamb Weston’s current financial year's EPS has jumped 8.6% over the past 60 days. LW has a long-term earnings growth rate of 26.9%. Shares of this Zacks Rank #1 (Strong Buy) company have rallied 38.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
General Mills:The manufacturer and marketer of branded consumer foods has seen its shares rise 22.7% in the past year. The Zacks Consensus Estimate for General Mills’ current financial-year earnings per share (EPS) has moved up by 2.3% over the past 60 days. GIS has a trailing four-quarter earnings surprise of 6.1%, on average. The consensus mark for current fiscal year sales suggests growth of 2.7% from the year-ago period reported figure. GIS has a long-term earnings growth rate of 7.5%.
General Mills has been gaining from its Accelerate strategy, which is highlighted by its key priorities. These include competing efficiently, investing in Holistic Margin Management and Strategic Revenue Management initiatives and reshaping the portfolio. The company is also gaining from its Pet unit. Apart from this, General Mills’ saving and pricing actions have been aiding it amid cost headwinds. GIS currently carries a Zacks Rank #2 (Buy).
Conagra Brands: Constant focus on innovation as well as a recovery in the Foodservice business is working well for Conagra. Also, the consumer-packaged goods food company is on track with robust pricing actions in the face of increasing cost of goods sold inflation. Conagra has a long-term earnings growth rate of 6%. The consensus mark for current fiscal year sales suggests growth of 5.2% from the year-ago period reported figure.
This Zacks Rank #2 stock has risen 8.1% in the past year. The Zacks Consensus Estimate for CAG’s current financial-year EPS has risen by 0.8% over the past 60 days.
The J. M. Smucker Company: This Zacks Rank #2 stock has jumped 9.9% in a year’s time. The manufacturer and marketer of branded food and beverage products has been gaining on higher at-home consumption, especially for coffee. Strength in the Away from Home division and efficient pricing have also been upsides for The J. M. Smucker Company. SJM’s investments in growth areas like Uncrustables and Dunkin' brands bode well.
The Zacks Consensus Estimate for The J. M. Smucker Company’s current financial-year EPS has remained stable over the past 30 days. SJM has a long-term earnings growth rate of 2.8%. The consensus mark for current fiscal year sales suggests growth of 4.5% from the year-ago period reported figure.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.