Teresa strikes again:
Campbell Soup and Conagra Will Benefit From People Eating at Home More, Jefferies Says -- Barrons.com
11:30 am ET June 22, 2020 (Dow Jones) Print
By Teresa Rivas
Campbell Soup and Conagra Brands are rising on a mixed day for the market, thanks to an upgrade from Jefferies, which argues that consumer habits have changed, to the benefit of the packaged food companies.
Analyst Rob Dickerson lifted his rating on Campbell (CPB) and Conagra (CAG) to Buy from Hold, with price targets of $59 and $41 on their respective stocks. He writes that he is increasingly confident that consumers will continue to eat more at home, even as coronavirus-related lockdowns ease, and that Campbell and Conagra are among the best positioned companies in a "higher-for-longer at-home food consumption" scenario, while also trading cheaply.
While packaged food as a whole has benefited from Covid-19, and Campbell and Conagra have edged up 0.2% and 0.1% year to date (enough to outpace the S&P 500's more than 4% decline in 2020), many investors worry that the good times won't last. After all, we've seen plenty of headlines about how consumers are happily back to munching at their favorite restaurants as more states reopen ahead of summer.
Yet Dickerson's research shows that many people will continue to eat more at home than they did pre-pandemic, even as stay-at-home orders are lifted, as some have lost their jobs and need to economize, while others are working remotely, where it isn't as convenient to treat themselves to lunch.
This is recent data, and it comes even with restaurant openings: "Almost half of those surveyed plan to eat at restaurants less post-Covid, while the majority stated that they are cooking at home more now and ordering delivery/takeout less versus two weeks ago."
That makes him confident that Campbell and Conagra will see a longer-term benefit than some bears thought. That also leads him to upgrade McCormick (MKC), albeit to Hold, as he is still wary of the stock's valuation.
Conagra was up 2.2%, to $34.29 Monday morning, while Campbell was up 0.8%, to $49.52. Barron's has made much the same argument in recent weeks, that packaged food stocks like Campbell and Conaga, have more room to run in the current environment, while the outlook for restaurants, while improving, could be less robust than some bulls believe.
Write to Teresa Rivas at teresa.rivas@barrons.com
Clearly Ms Rivas is more in agreement with me than my wife.
