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Credit Suisse's Winners And Losers In The Food Space

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Credit Suisse's Winners And Losers In The Food Space

Credit Suisse initiated coverage of a handful of food-related stocks Tuesday.

The Analyst

Credit Suisse's Judah Frommer initiated coverage of the following stocks:

  • SYSCO Corporation (NYSE: SYY): Outperform, $68 price target.
  • Kroger co (NYSE: KR): Outperform, $28 price target.
  • Performance Food Group Co (NYSE: PFGC), Outperform, $36 price target.
  • US Foods Holding Corp (NYSE: USFD): Outperform, $40 price target.
  • Sprouts Farmers Market Inc (NASDAQ: SFM): Neutral, $26 price target.
  • Supervalue Inc. (NYSE: SVU): Underperform, $15 price target.

Sysco

  • The company can leverage its status as the biggest player in the food service group to extend its lead in private brands.
  • The company's size also allows it to better catch up in areas where it falls short, like technology.
  • Investors should have confidence in the company's ability to achieve its three-year targets after delivering on the prior three-year plan.

Kroger

  • Kroger's strong price position and market-leading customer data will help the company gain share at the expense of weaker grocers.
  • Kroger boasts assets peers would "kill for," including a strong private label brand and click-and-collect.
  • Longer-term guidance has been realistically reset after 2017's earnings.

Related Link: Wall Street Debates Kroger After Disappointing 2018 Outlook

Performance Food Group

  • Performance Food is the smallest of the big three food service distributors, which gives it room to grow its top- and bottom-line in a "uniquely favorable" period.
  • he company should see industry-leading EBITDA growth in fiscal 2018, partly due to food inflation.
  • A "top-tier" management team will succeed in growing market organically and through acquisitions.

US Foods

  • A technology-led offering should continue generating superior top-line growth versus peers.
  • US Foods' margin structure is "ripe for improvement" through scale and efficiency.
  • A more "mature product offering" at rival food service companies represents "clear opportunities" for US Foods.

Sprouts Farmers Market 

  • Sprouts' focus on low-priced produce is no longer a "cutting-edge strategy," as mass merchants are offering the same to consumers.
  • Despite a rebound in top-line, Sprouts has yet to deliver a "clearer strategy" for its long-term story.
  • Slowing square-footage growth calls into question the stock's ability to sustain a premium valuation based on historical levels.

SuperValu

  • SuperValu's wholesale segment sales account for 75 percent of total sales, which reaffirms a struggling retail business.
  • The company's end customers, independent grocers, are "less than ideal" given the changing food retail landscape.
  • Headwinds from the loss of Albertsons business and pressure at company-owned stores implies an inflection point that's difficult to model.

Price Action

  • Shares of Sysco were were down 1.04 percent at the close Wednesday at $61.85. 
  • Shares of Kroger were up 1.44 percent at $24.58.
  • Shares of Performance Food Group were up 1.6 percent at $31.70. 
  • Shares of US Foods were down 1.2 percent at $34.61.
  • Shares of Sprouts Farmers Market were down 0.89 percent at $24.58.
  • Shares of SuperValu were down 7.45 percent at $14.54.

Related Link:

The Best Food Retail Stock Is...Dollar Tree?

Posted-In: Credit Suisse food food stocks GrocersAnalyst Color Price Target Initiation Analyst Ratings Best of Benzinga

 

Related Articles (KR + PFGC)

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