This past weekend eerily reminded citizens in the United States of the difficult times after the 9/11 attacks in 2001. Back then, the airlines were shut down, and many were too scared to travel anyway, as the shock and death toll from the attacks drove people inside where they watched in horror at first the attacks and then the aftermath. The COVID-19 scare is doing the same, while slowly at first, but now picking up speed, society is shutting down. No pro or amateur sports, schools are closed, restaurants and bars are being told to close, so pretty much life as we know it is being put on hold until the virus starts to wane.
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A new Jefferies report notes that the “food at home” buying is sure to jump. In fact, some stores’ supply chains are being taxed to keep delivering as panic buying has left many grocery shelves empty. The analysts noted this in the report:
Analysis suggests food-at-home could see incremental $90 billion in retail dollars March through May. If food-at-home were to increase to 70% of total U.S. food retail sales from March to May this year (from a pre-COVID-19 50% level), we estimate an incremental ~ $90 billion in food-at-home revenues (~7x the size of Kellogg globally). Food-at-home peaked at ~56% of total U.S. food retail sales during the 2009 Great Recession, which was financially based, not virally-driven. And given the shift to at-home food purchases seems much more than a week-long pantry load, we foresee an ongoing top line tailwind in the near term for many companies under our coverage.
Six top stocks that are rated Buy at Jefferies could be poised for solid gains from the current crisis. The situation is most likely temporary, but it may inject some big-time sales into the top lines of these companies in the second quarter and perhaps beyond.
BellRing Brands
This off-the-radar stock was hammered Monday but still trades above the 52-week low. BellRing Brands Inc. (NYSE: BRBR) is a packaged food and beverage company offering consumers convenient and nutritious products.
The company’s portfolio consists of ready-to-drink protein shakes with its Premier Protein brand, protein powder with Dymatize. and protein bars with PowerBar. BellRing sells products both in the United States and internationally, primarily in club channels, with exposure to FDM, specialty and e-commerce.
Jefferies lowered its price target to $21 from $23, while the Wall Street consensus target is $24.15. The shares closed Monday’s brutal trading session at $17.10, down a mild 5.45%, compared to the double-digit index losses.
Hostess Brands
This well-known company could also see a nice bump from the stay-at-home scenarios, and we all have had Twinkies. Hostess Brands Inc. (NASDAQ: TWNK) engages in developing, manufacturing, marketing, selling and distributing baked goods. It operates through following segments.
The Sweet Baked Goods segment consists of fresh and frozen baked goods and bread products that are sold under the Hostess, Dolly Madison, Cloverhill and Big Texas brands. The In-Store Bakery segment consists of Superior on Main branded and store-branded products sold through the in-store bakery section of grocery and club stores.
The Jefferies price target dropped to $15 from $16, and the consensus figure is $16.20. The stock was last seen trading at $10.72, down just over 4% on Monday.
Mondelez
This consumer sector giant makes good sense for conservative accounts. Mondelez International Inc. (NASDAQ: MDLZ | MDLZ Price Prediction) manufactures and markets snack food and beverage products worldwide. It offers biscuits, including cookies, crackers and salted snacks; chocolates, and gums and candies; powdered beverages and coffee; and cheese and grocery products.
Its primary brand portfolio includes LU, Nabisco and Oreo biscuits; Cadbury, Cadbury Dairy Milk and Milka chocolates; Trident gum; Jacobs Kaffee; and Tang powdered beverages.
Mondelez sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets through direct store delivery, company-owned and satellite warehouses, distribution centers and other facilities, as well as through independent sales offices and agents.
Shareholders receive a 2.24% dividend. The $64 Jefferies price target was lowered to $61. The consensus target is $63.74, Mondelez stock closed Monday $45.10 a share, after a stunning 11.43% drop.
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Nomad Food
This smaller cap play also could be a solid buy for more aggressive investors. Nomad Foods Ltd. (NYSE: NOMD) is a leading frozen foods company building a global portfolio of best-in-class food companies and brands within the frozen category and across the broader food sector.
The company’s portfolio of iconic brands, which includes Birds Eye, Findus, Iglo, Aunt Bessie’s and Goodfella’s, has been a part of consumers’ meals for generations, standing for great-tasting food that is convenient, high quality and nutritious.
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Last week Nomad announced a $300 million stock repurchase program, which is a huge positive for investors now.
The Jefferies price objective was actually raised to $24 from $22. The posted consensus price target is $21.65. The shares closed Monday’s volatile trading session at $17.20, down 2.49%.
Post
This company offers a wide range of products and a somewhat large capitalization profile. Post Holdings Inc. (NYSE: POST) is a consumer packaged goods holding company that engages in operating of center-of-the-store, refrigerated, food-service, food ingredients, active nutrition and private brand food categories.
Post’s Consumer Brands segment manufactures, markets, and sells branded and private label ready-to-eat cereal and hot cereal products. The Weetabix segment focuses on the marketing and distribution of branded and private label ready-to-eat cereal products.
The Refrigerated Food segment produces and distributes egg products, sausage, side dishes, cheese and other refrigerated products to retail and food-service customers. While the active Nutrition segment markets and distributes ready-to-drink beverages, bars, powders and other nutritional supplements, the Food-Service segment includes egg and potato products.
Jefferies lowered its $125 price target to $112, which compares to the $120.55 consensus target. The last trade on Monday was reported at $81.49, down over 6%.
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Simply Good Foods
This is another smaller cap, off-the-radar play that has been crushed and could rebound fast on strong sales. Simply Good Foods Co. (NASDAQ: SMPL) engages in the development, marketing and sale of nutritional food and snacking products. Its products include nutrition bars, ready-to-drink shakes, snacks, confectionery and frozen meals under the Atkins, SimplyProtein, Atkins Harvest Trail and Atkins Endulge brands.
Insiders continued to buy shares of the company recently, with a director adding 88,500 shares back in late February. Despite the current trauma, that bodes well for investors.
Jefferies lowered its price target to $23 from $27, well below the posted consensus of $30.25. Shares closed Monday at $15.84, down just over 6%.
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As we have noted since the start of the sell-off, the only kind of buying that should be done now is nibbling with small purchases. It may take months for the bottom to be put in, which we discussed in detail on Monday.
Like all panics and market sell-offs, this too shall pass. It makes sense to be very careful now, though. Yet, you don’t need to be a Wall Street analyst to know why these stocks make sense short term. Just go to the grocery store.
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