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Stifel's Top Food Stocks

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In a new report, analysts at Stifel took a look at food stocks and gave their updated outlook for the group. Here’s a breakdown of what they had to say.

Neutral Outlook

Overall, analysts have a neutral outlook for food stocks based on current premium valuations and “average” growth forecasts. Food stocks are currently priced at a 24 percent premium to the S&P 500.

Analysts believe that the announcement of the Kraft Foods Group Inc (NASDAQ: KRFT)/Heinz merger in Q1 helped support premium valuations in the space.

Fundamentals

Analysts are predicting 3 percent earnings growth for food stocks in 2015. Low fuel prices and international growth will likely to continue to help large American companies. Analysts are calling for a 50 bps increase in gross margins for food stocks this year as well.

In-line Q1

Analysts don’t see any big surprises from the group this earnings season. Stifel’s earnings estimates for The Hershey Co (NYSE: HSY), Dean Foods Co (NYSE: DF), Kellogg Co (NYSE: K), Treehouse Foods Inc (NYSE: THS), Post Holdings Inc (NYSE: POST) and Kraft are “a penny or so off from consensus.”
Analysts are calling for a 2 percent year-over-year (y/y) earnings per share (EPS) decline for large-cap food companies in Q1. They predict a 17 percent Y/Y decline in The J.M. Smucker Co’s (NYSE: SJM) earnings and a 14 percent Y/Y drop in Campbell Soup Co’s (NYSE: CPB) Q1 EPS.

Top Picks

Analysts advise investors to “remain selective in their food exposure.” Stifel’s top stock picks are The WhiteWave Foods Co (NYSE: WWAV), General Mills Inc (NYSE: GIS), Treehouse, and Kraft.

Latest Ratings for KRFT

DateFirmActionFromTo
Apr 2015Stifel NicolausMaintainsBuy
Mar 2015CitigroupMaintainsSell
Mar 2015Canaccord GenuityUpgradesHoldBuy

View More Analyst Ratings for KRFT
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