Food and Beverage Picks for 2013: Constellation Brands and Kraft Foods
Bank of America/Merrill Lynch's "2013 Food and Beverage Year Ahead" report is out. The analyst was looking for stocks of well-positioned companies with products that are protected from consumer weakness or those with strong franchises in developing markets.
Among its top stocks picks for this year were Constellation Brands (NYSE: STZ) and Kraft Foods (NASDAQ: KRFT). Here is a quick look at how these stocks have fared and what analysts in general expect from them.
This maker of Robert Mondavi wines, SVEDKA Vodka and other alcoholic beverages has a market cap of about $6.7 billion, but it offers no dividend. Its price-to-earnings (P/E) ratio is less than the industry average and the long-term earnings per share (EPS) growth forecast is more than 10 percent.
The return on equity is more than 15 percent and the operating margin is higher than the industry average. Shares sold short represent about two percent the float. That is the lowest short interest has been since September.
The consensus recommendation of the nine analysts polled by Thomson/First Call is to buy shares; three of them rate it at Strong Buy. Their mean price target, or where they expect the share price to go, represents about 10 percent potential upside. That target would be a new multiyear high.
The share price is more than 81 percent higher than a year ago, though shares have traded mostly between $34 and $36 since early October. Shares are up about five percent in the past week, along with the post-fiscal-cliff markets. The stock has outperformed U.K.-based competitor Diageo (NYSE: DEO), as well as the broader markets, over the past six months.
The former Kraft Foods was split into the Kraft Foods Group and Mondelez International (NASDAQ: MDLZ) in October. Kraft Foods Group is headquartered in Northfield, Illinois, and sports a market cap of about $27 billion. Its dividend yield is near 4.4 percent.
The P/E ratio is less than the industry average and the long-term EPS growth forecast is more than six percent. The operating margin is higher than the industry average, as well as that of competitor ConAgra Foods (NYSE: CAG). The short interest is less than one percent of the float. That was down about 11 percent from the number of shares sold short in the previous period.
Twelve of the 16 analysts surveyed recommend buying shares; none recommend selling. They believe the stock still has some room for growth, as their mean price target is almost seven percent higher than the current share price. That target would be a new high since the spin-off in October.
But shares are only marginally higher than six months ago, despite posting strong third-quarter results in November, and despite rising more than two percent in the past week. The stock has outperformed the likes of Dean Foods (NYSE: DF), Hillshire Brands (NYSE: HSH) and Mondelez over the past six months, but it has underperformed the broader markets in that time.
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