UBS on Food Products: U.S. Trends and Investment Theses
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Rating Summary:
7 Buy, 0 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 11 | Down: 24 | New: 12
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UBS on Food Products: U.S. Trends and Investment Theses
UBS analyst, David Palmer, said, "Kraft Story Intact; Still Our Favorite Food Name: Kraft’s US trends remain solid with the majority of volume weakness due to price pass-thru categories such as cheese, coffee, and nuts. We suspect that volume of these categories, which will reside in the new Kraft Foods, will recover as Kraft's low-teens inflation cools to midsingle digits in 2012. Kraft (Buy) remains our favorite food stock."
"Mixed Signals for US Food Stocks: While input costs are remaining stubbornly high, our gut is that inflation has peaked. This has set the stage for margin gains and accelerating EPS growth by mid-2012. That said, valuations remain higher than trough valuations during the previous inflation cycle, the US dollar is strengthening (bad for Kraft (NYSE: KFT) / Kellogg (NYSE: K) /Heinz (NYSE: HNZ)) and volume momentum is troubling for some names (e.g. General Mills (NYSE: GIS) / Campbell (NYSE: CPB)). Meanwhile, domestic names with strong underlying momentum (e.g. Hershey's (NYSE: HSY) / Hain Celestial (Nasdaq: HAIN)) carry a relatively large premium. Productivity cycles (positive for KFT/HNZ), emerging market growth (KFT/HNZ) and M&A upside (ConAgra (NYSE: CAG) / Ralcorp (NYSE: RAH)) remain major factors."
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UBS analyst, David Palmer, said, "Kraft Story Intact; Still Our Favorite Food Name: Kraft’s US trends remain solid with the majority of volume weakness due to price pass-thru categories such as cheese, coffee, and nuts. We suspect that volume of these categories, which will reside in the new Kraft Foods, will recover as Kraft's low-teens inflation cools to midsingle digits in 2012. Kraft (Buy) remains our favorite food stock."
"Mixed Signals for US Food Stocks: While input costs are remaining stubbornly high, our gut is that inflation has peaked. This has set the stage for margin gains and accelerating EPS growth by mid-2012. That said, valuations remain higher than trough valuations during the previous inflation cycle, the US dollar is strengthening (bad for Kraft (NYSE: KFT) / Kellogg (NYSE: K) /Heinz (NYSE: HNZ)) and volume momentum is troubling for some names (e.g. General Mills (NYSE: GIS) / Campbell (NYSE: CPB)). Meanwhile, domestic names with strong underlying momentum (e.g. Hershey's (NYSE: HSY) / Hain Celestial (Nasdaq: HAIN)) carry a relatively large premium. Productivity cycles (positive for KFT/HNZ), emerging market growth (KFT/HNZ) and M&A upside (ConAgra (NYSE: CAG) / Ralcorp (NYSE: RAH)) remain major factors."
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