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Grocery Outlet Holding Corp. GO has experienced a pullback in its share performance losing nearly half of its value and falling far below its 52-week high of $30.33, touched in last September. Currently trading at $16.27, the stock has seen a 46.4% drop from its peak. Over the past three months, Grocery Outlet shares have plunged 21.2%, underperforming the broader industry, which has risen 9.4% and the S&P 500, which posted a 2.7% return during the same period.
The recent decline in share performance is attributed to the challenges stemming from its systems transition, which began last September. Also, the company is grappling with rising expenses, which are putting additional pressure on its already thin margins, further contributing to its underperformance.
Moreover, Grocery Outlet’s stock has fallen below critical technical thresholds, including its 50-day and 200-day moving averages. This moving average is an important indicator for gauging market trends and momentum. The breach of this threshold heightens investor concerns about the stock’s short-term outlook.
Reflecting the negative sentiment around Grocery Outlet, the Zacks Consensus Estimate for 2024 has seen a downward revision. Over the past 60 days, the consensus estimate for earnings for the current fiscal year has fallen by a penny to 92 cents per share. This implies a year-over-year earnings decline of 14%. For the next fiscal, the Zacks Consensus Estimate for earnings has declined from 3.4% to $1.13.
What Derailed Grocery Outlet’s Stock?
The recent systems transition has posed significant challenges for Grocery Outlet and negatively impacting both its operational efficiency and financial performance. This disruption has resulted in lower-than-expected margins with the implementation of new technology platforms, which is reducing the gross margin by 100 basis points in the second quarter of 2024.
Although improvements have been made, the ongoing challenges could hinder margin expansion and operational scalability in the near term. Grocery Outlet guided a full-year gross margin of 30.5%, down from 31.3% guided earlier. The current projection showed an 80-basis point contraction in the gross margin from the year-ago period.
The company is grappling with rising SG&A (Selling, General, and Administrative) expenses, driven by higher costs for independent operator commissions, store occupancy and incentive compensation. This upward trend in SG&A expenses has been evident over the past few quarters and could strain profits.
Does GO Have Enough Potential to Turn Things Around?
Despite challenges, Grocery Outlet's strategic focus on opportunistic purchasing, targeted marketing, store expansion and e-commerce initiatives is demonstrating potential. With its distinctive business model featuring opportunistic sourcing and an Independent Operator structure, GO differentiates itself from conventional retailers.
Another key factor that could turn things around for Grocery outlet is the 'WOW!' deals. The store’s compelling value proposition is expected to continue to attract bargain hunters, encourage customers to revisit stores and increase basket sizes. Notably, a typical 'Grocery Outlet basket' is priced roughly 40% below that of conventional grocers and approximately 20% below leading discounters.
With a customer-centric approach, Grocery Outlet recently announced the launch of its new private label program, GO Brands. Set to introduce 100 new products by the end of the year, the program will feature three distinct lines: SimplyGO, GO Home & Haven, and GO Paw & Pamper. This initiative, starting this month, underscores the company’s commitment to offering both affordability and quality, with the GO Brands program aimed at delivering exceptional value.
Does GO’s Stock Looks Attractive?
Investors might find Grocery Outlet appealing due to its relatively low valuation. GO is currently trading at a discount to its historical and industry benchmarks. The stock has a forward 12-month P/E ratio of 15.21, which is below the median level of 28.1 scaled in the past year. This compares to the forward 12-month P/E ratio of 18.55 for the industry.
Final Words on Grocery Outlet
Quite apparent, Grocery Outlet’s system transition has weighed on its performance lately, but that does not mean the company is devoid of potential. Investors with a long-term horizon may stay invested in the stock. The recent decline in the stock price has made it look attractive and provides a better entry point for potential investors. However, with the margin yet to recover in full, Grocery Outlet comes with an element of caution.
GO currently carries a Zacks Rank #3 (Hold).
Three Stocks to Consider
Here, we have highlighted three better-ranked food stocks, namely, The Chef's Warehouse CHEF, Pilgrim’s Pride PPC and Ollie's Bargain Outlet OLLI.
The Chef’s Warehouse, which engages in the distribution of specialty food products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimated figure for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, currently sports a Zacks Rank #1. PPC delivered a positive earnings surprise of 27.3% in the trailing four quarters, on average. The Zacks Consensus Estimated figure for Pilgrim’s Pride’s current financial-year earnings indicates growth of 183.43%, , from the prior-year reported level.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, currently carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 7.9%, on average. The Zacks Consensus Estimated figure for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.7% and 12.71%, respectively, from the year-earlier levels.
Zacks Investment Research
Tilray Brands, Inc. TLRY has concluded the acquisition of Atwater Brewery from Molson Coors Beverage Company TAP. This marks the acquisition of the last one as part of its deal with Molson Coors to buy four breweries. Earlier this month, Tilray acquired three craft breweries, namely Hop Valley Brewing Company, Terrapin Beer Co. and Revolver Brewing, from Molson Coors.
Atwater Brewery is a well-established craft brewery with a strong presence in Michigan. This acquisition enhances Tilray’s footprint in the Great Lakes region and fortifies its craft beer portfolio. The company is eager to integrate Atwater Brewery and leverage its resources to drive growth, broaden distribution and make its outstanding beers available to more consumers.
The earlier acquisitions of Hop Valley Brewing Company, Terrapin Beer Co. and Revolver Brewing added 30% more beer-buying accounts into Tilray's portfolio, providing access to new customers and driving revenue growth. This expansion is also expected to create cost synergies by optimizing operations and enhancing Tilray’s distribution network, allowing the company to reach a wider audience.
Unlocking Opportunities for TLRY Post Acquisition
With the acquisition of the four craft breweries from Molson Coors, TLRY expanded its presence in key beer states like Texas and Michigan, with Texas being the second-largest beer-consumption state. The acquired craft beer brands are set to be the key growth drivers for Tilray. With this acquisition, TLRY’s beer business is projected to grow to 15 million cases annually.
These acquisitions will position Tilray as the 5th largest craft brewer in the country and the top craft brewer in the Pacific Northwest and Georgia, bolstering its leadership position in the U.S. craft beer market. This move is a part of TLRY's broader strategy to diversify its portfolio and expand its presence beyond the cannabis beverages category.
With this expansion, Tilray's beverage portfolio now features a diverse range of products, including top craft beers, spirits and non-alcoholic brands. The impressive lineup includes SweetWater Brewing Company, Montauk Brewing Company, Alpine Beer Company, Green Flash Brewing Company, Shock Top, Breckenridge Brewery, Breckenridge Distillery, Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewing Company, Widmer Brothers Brewing, Square Mile Cider Company, HiBall Energy and Happy Flower CBD. This strategic diversification strengthens its already strong position in Canada’s recreational cannabis and THC beverage markets.
Tilray is transforming its craft beer portfolio by integrating these exceptional new brands with its skilled team. Management expects this acquisition to enhance Tilray’s standing in the craft beverage market and create global growth opportunities, reinforcing its commitment to shareholder value. The company remains focused on delivering high-quality products and meeting consumer demands while maximizing the potential of its expanded brand portfolio.
Conclusion
Management expects the addition of Molson Coors breweries to drive growth, enhance market position, and create global opportunities, reinforcing its commitment to shareholder value. Looking ahead, TLRY plans to leverage its expertise in product innovation and distribution to fully capitalize on these brands, boost sales, streamline operations and expand its presence across the United States.
Shares of Tilray have declined 26.1% in the year-to-date period against the industry’s rise of 3.6%. The company currently has a Zacks Rank #3 (Hold).
2 Consumer Staples Stocks to Consider
We have highlighted two better-ranked stocks from the Consumer Staple sector, namely The Chef's Warehouse CHEF and Coca-Cola KO.
The Chef's Warehouse offers specialty food products in the United States. CHEF presently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 33.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for CHEF’s current financial year’s sales and EPS indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported figures.
Coca-Cola, the global beverage giant, currently has a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 4.7%, on average.
The Zacks Consensus Estimate for KO’s current financial-year sales and earnings suggests growth of 0.6% and 6%, respectively, from the year-ago reported figures.
Zacks Investment Research
Anheuser-Busch InBev SA/NV BUD, alias AB InBev, has shown steady growth in the stock market, with its shares surpassing the broader industry and the S&P 500 in the past three months. This positive trend has been driven by the company's unwavering commitment to enhancing its brands through diverse beer offerings, aligning with the industry's shift toward premium products.
AB InBev is well-positioned to benefit from the expansion of its Beyond Beer portfolio and its investments in B2B platforms, e-commerce and digital marketing in the near term.
In the past three months, the company’s shares have risen 9%, leaving behind the industry peers and the broader S&P 500 index’s increases of 4.3% and 1.7%, respectively. The company also outperformed the broader Zacks Consumer Staples sector's growth of 8.2% in the same period.
BUD’s Price Performance
At the current price of $64.85, the stock trades at a 3.9% discount to its 52-week high of $67.49. Additionally, BUD is trading above its 50 and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in AB InBev’s financial health and prospects.
AB InBev Stock Trades Above 50 & 200-Day Moving Average
Strategies Support BUD Stock’s Rally
The stock’s upward trajectory is well-supported by AB InBev’s distinctive commercial strategy, robust brand portfolio and focus on operational excellence. Key drivers include the company’s relentless execution, brand investments, premiumization efforts and accelerated digital transformation. Moreover, the expansion of the Beyond Beer portfolio and other revenue-management initiatives position the company for long-term growth.
AB InBev sees premiumization in the beer industry as a major growth opportunity, investing in a diverse range of global, international and craft premium brands. Its global brands lead the premiumization trend, and the above-core portfolio has shown strong performance. In the second quarter of 2024, revenues for the above-core portfolio grew modestly, driven by solid performances by Corona and South African brands, and notable increases for Modelo in Mexico and Spaten in Brazil.
The company is also enhancing its capabilities to connect with customers through its growing digital platform, which includes B2B sales and e-commerce platforms like BEES and Zé Delivery. The acceleration in B2B platforms, e-commerce and digital marketing is fueling top-line growth.
AB InBev’s digital transformation is progressing well, with B2B digital platforms contributing about 70% to revenues in the second quarter of 2024. BEES had 3.8 million active users by the end of the second quarter and achieved $11.7 billion in gross merchandise value, marking a 20% year-over-year increase. Its omni-channel, direct-to-consumer ecosystem generated $140 million in revenues for the quarter.
The company continues to expand its Beyond Beer portfolio, which includes ready-to-drink beverages, such as Canned Wine and Cocktails, Hard Seltzers, Cider and Flavored Malt Beverages. This trend aligns with rising demand for low-alcohol or non-alcoholic drinks, and contributed $375 million to total revenues in the second quarter of 2024.
Upward Estimate Trajectory for BUD
The Zacks Consensus Estimate for BUD’s 2024 earnings per share rose 1.2% in the last 30 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
For 2024, the Zacks Consensus Estimate for BUD’s sales and EPS implies 2.4% and 11.8% year-over-year growth, respectively. The consensus mark for 2025 sales and earnings indicates 3.4% and 10.8% year-over-year increases, respectively.
BUD Stock Undervalued
The company is currently trading at a discount to its industry on a forward 12-month P/E basis, making the stock an attractive pick for investors. AB InBev is currently trading at a forward 12-month P/E ratio of 17.75X, below the sector’s average of 18.25X and the S&P 500’s average of 21.19X.
How to Play the Stock?
AB InBev remains a powerhouse in the beverage industry, with more than 500 iconic brands under its belt. The company’s strategy of crafting a diverse brand portfolio that meets a wide array of consumer preferences, from pricing to flavor profiles and brand identity, bodes well. This strategic approach not only helps it tackle the pressures of rising commodity costs but also fuels its investments for sustainable long-term growth.
The company's robust fundamentals highlight its strong financial health and operational efficiency. The upward price and estimates trajectory, combined with a relatively low valuation than peers, offers an attractive opportunity for investors looking to invest in this profitable beverage company. For current shareholders, we suggest staying with this Zacks Rank #3 (Hold) stock with solid long-term potential.
3 Consumer Staples Stocks to Consider
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely The Chef's Warehouse CHEF, Coca-Cola KO and Flowers Foods FLO.
The Chef's Warehouse offers specialty food products in the United States. CHEF presently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 33.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for CHEF’s current financial year’s sales and EPS indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported figures.
Coca-Cola, the global beverage giant, currently has a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 4.7%, on average.
The Zacks Consensus Estimate for KO’s current financial-year sales and earnings suggests growth of 0.6% and 6%, respectively, from the year-ago reported figures.
Flowers Foods emphasizes providing high-quality baked items, developing strong brands, making innovations to improve capabilities and undertaking prudent acquisitions. It currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for FLO’s current financial-year sales and earnings indicates growth of 1% and 5%, respectively, from the year-earlier actuals. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
Zacks Investment Research
After an initial setback at the beginning of the month, the broader U.S. equity markets witnessed a steady uptrend over the past few days as the technology stocks appeared to regain the lost ground. The stock market rally was further propelled by cooling inflation, with data from the U.S. Consumer Price Index revealing that the 12-month inflation rate declined to 2.5% in August – the lowest level since February 2021. This was followed by another healthy economic data that portrayed that the Producer Price Index, a measure of final demand goods and services costs that producers receive, increased 0.2% in August – in line with the broader expectations.
With a better-than-expected 2.8% annualized GDP growth in the second quarter and solid labor market conditions, it appeared that the economy was back on the growth track, cooling recessionary fears. Amid the uncertainty, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks like Pilgrim's Pride Corporation PPC, Tenet Healthcare Corporation THC and MGIC Investment Corporation MTG when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. Momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. So, this strategy is quite tricky to implement, as detecting these trends is no child’s play. Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from both long-term price momentum and a short-term pullback in price.
Screening Parameters for Momentum Anomaly Stocks
Percentage Change in Price (52 Weeks) = Top #50: This selects the top 50 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get the best stocks that have appreciated steadily over the past year.
Percentage Change in Price (1 Week) = Bottom #10: From the above 50 stocks, we then choose those that are also among the 10 worst performers over a short one-week period. This parameter picks the ones that have witnessed a short-term pullback in price.
Zacks Rank #1: Stocks sporting a Zacks Rank #1 (Strong Buy) have a proven history of outperformance irrespective of the market conditions. You can see the complete list of today’s Zacks #1 Rank stocks here.
Momentum Style Score of B or Better: A top Momentum Style Score knocks out a lot of the screening process as it takes into account several factors that include volume change and performance relative to its peers. It indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), handily outperform other stocks.
Current Price greater than $5: The stocks must all be trading at a minimum of $5.
Market Capitalization = Top #3000: We have chosen stocks that are among the top 3000 in terms of market value to ensure the stability of price.
Average 20-Day Volume greater than 100,000: A substantial trading volume ensures that these stocks are easily tradable.
Here are three stocks out of the eight that made it through this screen:
Greeley, CO-based Pilgrim's Pride is engaged in the processing, production, marketing and distribution of frozen, fresh and value-added chicken products. The company offers its services in the United States, Mexico, France, the Netherlands, Puerto Rico and Mexico through several distributors, retailers and food service operators. The stock has surged 65.4% in the past year but declined 9.3% in the past week. Pilgrim's Pride has a Momentum Score of B.
Founded in 1967 and headquartered in Dallas, TX, Tenet is an investor-owned healthcare services company that owns and operates general hospitals and related healthcare facilities for urban and rural communities in numerous states and has offices in California and Florida. The company has investments in other healthcare companies and is one of the largest investor-owned healthcare delivery systems in the United States. The stock has gained 121.5% in the past year but declined 2.4% in the past week. Tenet has a Momentum Score of A.
Based in Milwaukee, WI, and formed in 1957, MGIC Investment is the parent company of Mortgage Guaranty Insurance Corporation, the largest private mortgage insurer in the United States. It established the private mortgage insurance industry to provide a private market alternative to federal government insurance programs for families wanting to buy a home with less than a 20% down payment. With a focus on sustainable homeownership, MGIC Investment provides a critical component of the country's residential mortgage finance system by protecting mortgage investors from credit losses. The stock has rallied 42.9% in the past year but lost 1.9% in the past week. MGIC Investment has a Momentum Score of B.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
Zacks Investment Research
Pilgrim's Pride (PPC) closed at $41.27 in the latest trading session, marking a -1.76% move from the prior day. The stock trailed the S&P 500, which registered a daily gain of 0.75%. Meanwhile, the Dow gained 0.58%, and the Nasdaq, a tech-heavy index, added 1%.
The the stock of poultry producer has fallen by 8.05% in the past month, lagging the Consumer Staples sector's gain of 3.54% and the S&P 500's gain of 4.03%.
The investment community will be paying close attention to the earnings performance of Pilgrim's Pride in its upcoming release. The company is forecasted to report an EPS of $1.28, showcasing a 120.69% upward movement from the corresponding quarter of the prior year.
Investors should also note any recent changes to analyst estimates for Pilgrim's Pride. These recent revisions tend to reflect the evolving nature of short-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.
Our research shows that these estimate changes are directly correlated with near-term stock prices. To take advantage of this, we've established the Zacks Rank, an exclusive model that considers these estimated changes and delivers an operational rating system.
The Zacks Rank system, stretching from #1 (Strong Buy) to #5 (Strong Sell), has a noteworthy track record of outperforming, validated by third-party audits, with stocks rated #1 producing an average annual return of +25% since the year 1988. Over the past month, the Zacks Consensus EPS estimate has remained steady. As of now, Pilgrim's Pride holds a Zacks Rank of #1 (Strong Buy).
Digging into valuation, Pilgrim's Pride currently has a Forward P/E ratio of 8.77. This indicates a discount in contrast to its industry's Forward P/E of 19.86.
We can also see that PPC currently has a PEG ratio of 0.21. Comparable to the widely accepted P/E ratio, the PEG ratio also accounts for the company's projected earnings growth. As of the close of trade yesterday, the Food - Meat Products industry held an average PEG ratio of 0.43.
The Food - Meat Products industry is part of the Consumer Staples sector. With its current Zacks Industry Rank of 47, this industry ranks in the top 19% of all industries, numbering over 250.
The Zacks Industry Rank assesses the vigor of our specific industry groups by computing the average Zacks Rank of the individual stocks incorporated in the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
Zacks Investment Research
TreeHouse Foods, Inc. THS has established a strong market position by capitalizing on two major long-term consumer trends, which include the increasing demand for private-label groceries in North America and the expanding popularity of snack products. With its diverse portfolio, THS is well-positioned to capture a growing share in this evolving market.
As private brands have steadily gained market share over the past 20 years, TreeHouse Foods has demonstrated its capacity to address consumer needs while maintaining attractive pricing. The elevated price gaps between national and private brands further support continued growth in the private label sector.
TreeHouse Foods has reinforced competitive position in the market by successfully executing its strategies in several key product categories, including cookies, refrigerated dough, pretzels and pickles. These aspects indicate growth in the second half of the year. Additionally, THS' strategic investments and an expanding net sales pipeline contribute to its strong market position. The abovementioned factors solidify the company's reputation as a leading supplier of private brands.
Shares of THS have gained 15.7%, outpacing the industry’s growth of 7.8% in the past three months.
Growth Factors for TreeHouse Foods' Stock
TreeHouse Foods’ transformation journey is poised for success as it focuses on strengthening and expanding its presence in the snacking and beverage sectors. This effort includes improving supply chain operations and delivering exceptional service to drive organic growth and create long-term value for stakeholders.
Key initiatives to enhance the supply chain includes the implementation of the TreeHouse Management Operating System (TMOS) and improvements in procurement and distribution. These efforts are intended to enhance operational execution, increase profit margins and build stronger customer relationships.
In the first half of 2024, the TMOS initiatives have led to notable improvements in overall equipment effectiveness and service quality. TreeHouse Foods expects to achieve $50 million in gross cost savings in the second half of 2024, driving margin expansion. Additionally, the company expects increased volume during this period, fueled by seasonal demand in categories such as coffee, creamer, hot cereal, refrigerated dough and broth. It also foresees meeting its objectives by restarting broth facility during this time frame.
Strategic acquisitions have played a crucial role in expanding THS’ product offerings. Notable acquisitions in 2024, including Bick's pickles, Habitant pickled beets, Woodman's horseradish and McLarens pickled onions brands from The J.M. Smucker have significantly diversified the company's revenue streams and enhanced its portfolio. These additions have bolstered TreeHouse Foods' position in the market by catering to a wider range of consumers.
Roadblocks on THS’ Way
While TreeHouse Foods has made significant strides, ongoing supply chain hurdles remain a challenge. Issues related to increased labor costs and the restoration of the broth facility resulted in a $3 million headwind. The supply-chain disruptions also impacted the company’s gross margin, which fell to 16.3%, a 0.3% point decrease from the previous year, due to the costs associated with bringing the broth facility back.
The company has been battling with high operating expenses in the second quarter, which has put pressure on its profits. This uprise was driven by lower TSA income and increased personnel and capability investments. However, these impacts were partially mitigated by reduced freight expenses and TSA-related cost reductions.
How to Play THS Stock?
TreeHouse Foods has reinforced its market standing by focusing on private-label and snack products, aligning with key consumer trends. Although supply chain issues and rising operating costs pose challenges, the company's strategic initiatives and acquisitions suggest potential for sustained growth. Investors should consider a balanced approach, weighing the company's growth prospects against current operational hurdles. TreeHouse Foods currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Here, we have highlighted some better-ranked food stocks, namely, The Chef's Warehouse CHEF, Pilgrim’s Pride PPC and Ollie's Bargain Outlet OLLI. While The Chef's Warehouse and Pilgrim’s Pride sport a Zacks Rank #1 (Strong Buy) each, Ollie's Bargain Outlet carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimated figure for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
PPC delivered a positive earnings surprise of 27.3% in the trailing four quarters, on average. The Zacks Consensus Estimated figure for Pilgrim’s Pride’s current financial-year earnings indicates growth of 183.4%, respectively, from the prior-year reported level.
OLLI has a trailing four-quarter earnings surprise of 7.9%, on average. The Zacks Consensus Estimated figure for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.6% and 12.7%, respectively, from the year-earlier level.
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Monster Beverage Corporation MNST stock has lost 13.8% in the year-to-date period, underperforming its industry peers and the S&P 500 index. MNST’s stock movement reflects a decline from the industry and the Consumer Staples sector’s growth of 12.4% and 10.4%, respectively. The company also underperformed the S&P 500's 15% rise in the same period.
MNST Price Performance
At the current price of $49.65, the stock trades at a 23.3% discount to its 52-week high of $61.23 and close to its 52-week low mark of $43.32. MNST is trading below its 200-day moving average, signaling potential bearish sentiment in maintaining recent performance levels.
However, the company’s share price crossed its 50-day moving average on Sept. 9 and has continued to trade above this mark since then.
Monster Beverage Trades Below 200-Day Moving Average
The Zacks Rank #3 (Hold) company’s stock suffered a pullback due to reduced foot traffic in convenience stores and a retail shift toward mass and dollar channels. Additionally, a tighter consumer spending environment and weaker demand have negatively impacted beverage and consumer packaged goods companies.
These challenges were evident in the company’s second-quarter 2024 performance, with management noting slower growth rates in the energy drink category in the United States and several other countries.
According to Nielsen reports for the 13 weeks ending July 20, 2024, sales in the energy drink category, including energy shots, across the company’s combined outlets (convenience, grocery, drug and mass merchandisers) increased 0.6% year over year. The company’s energy drinks portfolio includes Monster Energy, Reign, Bang and Full Throttle. Sales of the company’s energy drinks brands, excluding Bang, declined 2.5% in the second quarter.
In the second quarter of 2024, Monster Energy sales fell 3% year over year, Reign sales dipped 0.5% and Full Throttle sales decreased 6.9%, while Red Bull sales rose 1.7%.
MNST’s Estimates Trend Down
The Zacks Consensus Estimate for Monster Beverage’s 2024 and 2025 EPS declined 1.2% and 1.05%, respectively, in the last 30 days. The downward revision in earnings estimates indicates that analysts are slowly losing confidence in the stock.
For 2024, the Zacks Consensus Estimate for MNST’s sales and earnings implies year-over-year growth of 5.5% and 7.1%, respectively. The consensus mark for 2025 sales and earnings indicates 8.2% and 13.8% year-over-year growth, respectively.
Here’s Why MNST Could Surprise You
Despite challenges like soft retail traffic and its impact on energy drink sales in certain markets, the global energy drinks category has shown resilience and growth. Consumers continue to view energy drinks as an affordable luxury, driving opportunities for increased penetration and per capita consumption. The company's expansion into non-Nielsen measured channels further supports its growth prospects.
Notably, net sales to customers outside the United States grew 4.3% year over year, accounting for about 39% of the total net sales, and rose 13.7% on a currency-adjusted basis.
Monster Beverage is also exploring international price increases and plans a 5% price hike on core brands and packages in the United States starting Nov. 1, 2024. The company has maintained market share leadership in the U.S. energy drink category across all outlets for the 13 weeks ending July 2, 2024.
Innovation has been a key growth driver for the company, with positive feedback from bottlers, distributors, wholesalers, retailers and consumers worldwide. Its robust pipeline for non-alcoholic and alcoholic beverages is set to keep the momentum going.
Exciting launches include Monster Energy Ultra Vice Guava in the United States in October 2024 and an expanded rollout of Predator Energy Gold Strike in China in late 2024 and 2025, following its launch in April 2024. The Beast Unleashed is available in all 50 states, and the company’s new hard tea line, Nasty Beast, is available in 49 states. A second variety pack of The Beast Unleashed in slim 12-oz cans, featuring Mean Green, Pink Poison, Gnarly Grape, and Killer Sunrise, is set to debut soon.
Key Picks From MNST’s Sector
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely The Chef's Warehouse CHEF, Coca-Cola KO and Flowers Foods FLO.
The Chef's Warehouse offers specialty food products in the United States. CHEF presently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 33.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for CHEF’s current financial year’s sales and EPS indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported figures.
Coca-Cola, the global beverage giant, currently has a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 4.7%, on average.
The Zacks Consensus Estimate for KO’s current financial-year sales and earnings suggests growth of 0.6% and 6%, respectively, from the year-ago reported figures.
Flowers Foods emphasizes providing high-quality baked items, developing strong brands, making innovations to improve capabilities and undertaking prudent acquisitions. It currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for FLO’s current financial-year sales and earnings indicates growth of 1% and 4.2%, respectively, from the year-earlier actuals. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
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