Food and beverage stocks have outperformed the market as a whole in 2022, as consumers go for the essentials.
The S&P Food & Beverage Select Industry Index has lost only 2.48% so far this year, compared to an 18.38% drop for the S&P 500.
With second-quarter earnings reports for the industry on their way in coming weeks, Bank of America analysts named their “favorite ideas” among food and beverage stocks.
Coca-Cola
(KO)
“We see unit case volume outperformance, as best-in-class revenue growth management helps support demand into a broader global reopening this summer,” the analysts said.
Coke has a “favorable long-term setup with a solid track record of cash generation by a battle-tested management team,” they said. Their price target for the stock is $70, compared to a recent quote of $63.
Kraft Heinz
(KHC)
“We continue to see meaningful upside, as KHC simply meets its financial targets, given changes to the company portfolio, a more data-driven approach and realized efficiencies,” the analysts said.
“KHC is well positioned to drive sales growth in 2022, while managing inflation and investments.” The analysts’ price target for the stock is $48, compared to a recent quote of $38.
Monster Beverage
(MNST)
“We lower estimates on the quarter and year on slightly weaker scanner and foreign exchange headwinds,” the analysts said.
But, “we see potential for positive estimate revisions, as aluminum prices potentially turn deflationary in the second half of 2022,” they said. “Year to date, MNST's stock price has been inversely correlated (74%) with the price of aluminum.”
The analysts’ price target for the stock is $115, compared to a recent quote of $97, “given faster relative growth and favorable margin structure relative to peers.”
PepsiCo
(PEP)
It has “demonstrated pricing power in resilient categories, making for a good setup, with potential for reinvested upside to build groundwork for the future,” the analysts said.
They lauded Pepsi’s “strong capacity, distribution and pricing positions which position them to outperform in this dynamic environment.” The analysts’ price target for the stock is $190, compared to a recent quote of $171.
Other companies
Meanwhile, the analysts upgraded Vita Coco (COCO), a maker of coconut water, to buy from neutral. “We believe ocean freight could become a tailwind to EBITDA [earnings before interest, taxes, depreciation and amortization] in 2023,” they said.
The analysts’ price target for the stock is $12, compared to a recent quote of $11.53.
Among underperform ratings, the analysts highlighted Beyond Meat (BYND), the plant-based meat company. “We continue to see risk to consensus gross margins in the second quarter, as well as the company's sales outlook for fiscal year 2022, given implied acceleration needed in the second half of the year,” the analysts said.
They have a price target of $20, compared to a recent quote of $32.43.
The author of this story owns shares of Coca-Cola, Kraft Heinz and PepsiCo.
