With Thanksgiving coming up next month, Americans are gearing up for some big holiday feasts. Unfortunately, investors have lost their appetite for many food and beverage stocks this year after earnings numbers and share price performance has mostly lagged the market. These companies will soon be lapping their tax cut savings and will be contending with commodity cost inflation and foreign exchange headwinds in 2019. In a difficult environment, Bank of America analyst Bryan Spillane says investors should focus on key themes of organic growth, consolidation and value. Here are nine food and beverage stocks that fit that description.
Constellation Brands (ticker: STZ)
Constellation Brands is guiding for fiscal 2019 organic revenue growth of between 2 and 4 percent. The company is a global leader in alcoholic beverages, including premium wine. In addition to its traditional beverage business, Constellation’s recent $4 billion investment in Canadian cannabis producer Canopy Growth Corp. (CGC) gives the company a potential wild-card growth opportunity in the cannabis beverage market. Spillane says STZ stock deserves a market premium over other staples stocks due to its earnings and margin growth potential. Bank of America has a “buy” rating and $240 price target for STZ stock.
PepsiCo reported overall organic sales growth of 4.9 percent in the most recent quarter, including 10 percent growth from the international business and 2.5 percent growth in the sluggish North American market. Spillane says soft drinks and snacks are high-value categories, and PepsiCo has plenty of room to grow in international markets. The key uncertainty in the near term will be whether the new CEO will take 2019 as an opportunity to reset earnings expectations and/or invest in new strategies. Bank of America has a “buy” rating and $125 price target for PEP stock.
Coca-Cola Company (KO)
Like rival PepsiCo, Coca-Cola is expecting full-year organic revenue growth of at least 4 percent in 2018. Despite foreign exchange headwinds, Coca-Cola is forecasting full-year earnings per share growth at or near double digits. While currency drag will likely continue to eat into international profits, Spillane’s latest checks suggest the domestic business is healthy. Spillane is anticipating a slight EPS miss when the company reports third-quarter numbers on Oct. 30, but 4.5 percent organic revenue growth might help ease investor concerns. Bank of America has a “buy” rating and $52 price target for KO stock.
Lamb Weston Holdings, Inc. (LW)
Lamb Weston, a spin-off of Conagra Brands (CAG), is…
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