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The research firm said that the topline growth would be muted, and margins might be pressured broadly in the sector due to changing consumer preferences and high input costs.
Morgan Stanley has initiated coverage on U.S. packaged food industry stocks with a cautionary but in-line outlook, according to an Investing.com report on Monday.
The research firm said that the topline growth would be muted, and margins might be pressured broadly in the sector due to changing consumer preferences and high input costs.
It kicked off coverage on Kraft Heinz Co (KHC) and General Mills, Inc (GIS) with an 'underweight' rating and price targets of $29 and $53, respectively.
The target for Kraft Heinz is the same as its current share price, while General Mills’ target implies a 9% downside.
On the other hand, it rated Mondelez International, Inc (MDLZ) 'overweight' with a price target of $69, implying a 6.2% upside.
Morgan Stanley said Mondelez will benefit from higher-growth geographies and durable pricing power. At the same time, Kraft Heinz and General Mills face concerns over weaker topline trends and lower earnings visibility.
The brokerage named BellRing Brands, Inc. (BRBR) as its top pick in the basket of packaged food stocks.
It gave an 'overweight' rating and a $84 price target, adding that current price trends in the stock provide an attractive entry point.
Shares of Bellring Brands jumped 4.1% to $73.55 on Monday.
On Stocktwits, retail sentiment for Bellring Brands and Kraft Heinz was 'neutral,' while investors were 'bearish' on Mondelez and General Mills.
Consumer staple companies are typically more resilient to headwinds like inflation than those selling discretionary items.
The Consumer Staples Select Sector SPDR Fund (XLP), the largest and most popular ETF that tracks consumer staple stocks, is up 1% year to date compared to the 1.9% decline in the benchmark S&P 500 index (SPX).
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