Food and Beverage Picks for 2013: Coca-Cola and Mondelez
Bank of America/Merrill Lynch’s “2013 Food and Beverage Year Ahead” report came out this week. 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. Its top developing markets picks for this year were Coca-Cola (NYSE: KO) and Mondelez International (NASDAQ: MDLZ). Here is a quick look at how these stocks have fared and what analysts in general expect from them.
This Atlanta-based leading maker of various nonalcoholic beverages has a market cap near $169 billion and a dividend yield of about 2.7 percent. Its price-to-earnings (P/E) ratio is less than the industry average and the long-term earnings per share (EPS) growth forecast is about eight percent. The return on equity is more than 26 percent and the operating margin is higher than the industry average. Shares sold short represent less than one percent the float.
The consensus recommendation of the 18 analysts polled by Thomson/First Call is to buy shares; six of them rate it at Strong Buy. Their mean price target, or where they expect the share price to go, represents about 11 percent potential upside, and would be a level the share price has not seen since 1998.
The share price is up almost four percent in the past week, but only about eight percent higher than a year ago. Shares are down about eight percent from the 52-week high back in July. Over the past six months, the stock has outperformed PepsiCo (NYSE: PEP) but underperformed Dr Pepper Snapple (NYSE: DPS) and the S&P 500.
The former Kraft Foods split into the Kraft Foods Group (NASDAQ: KRFT) and Mondelez International in October. Mondelez is headquartered in Deerfield, Illinois, and sports a market cap of more than $47 billion. Its dividend yield is near 1.9 percent. The P/E ratio is less than the industry average and the long-term EPS growth forecast is more than 11 percent. The operating margin is higher than the industry average, but the return on equity is only about nine percent. The short interest is less than one percent of the float. That is the fewest number of shares sold short since October.
Of the 21 analysts surveyed, 15 rate the stock at Buy or Strong Buy. They believe the stock has some room for growth, as their mean price target is about 11 percent higher than the current share price. That target would be a new high since the spin-off in October.
The share price is almost five percent lower than when the companies split, despite rising more than five percent in the past week. A disappointing third-quarter report in November did not help. The stock has underperformed the likes of Hershey (NYSE: HSY), Kellogg (NYSE: K) and the new Kraft Foods, as well as the broader markets, since the spin-off.
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