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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.
Zacks Investment Research
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.
Zacks Investment Research
United Natural Foods Inc. UNFI is undergoing a major transformation aimed at improving its margins and cash flow. The company's strategic initiatives include optimizing its network, reducing capital expenditures, cutting costs and lowering net working capital. By focusing on these areas, UNFI aims to build on the $150 million in expense efficiencies already achieved. This transformation is designed to enhance operational efficiency and long-term value for stakeholders.
UNFI’s Strategic Investments and Operational Efficiency
United Natural Foods is planning to invest around $300 million in capital expenditures for the fiscal 2025. This investment will be directed toward maintenance, network enhancements and technology upgrades. The goal is to optimize resource allocation, strengthen the business and enhance its balance sheet. This includes investing in labor for distribution centers and transportation, which has already shown improvements in staff turnover and operational throughput.
United Natural is also making strides in improving its supply chain processes and management disciplines to fuel growth. In this regard, UNFI is achieving a major reduction in shrink. Recent improvements have brought the wholesale margin closer to pre-COVID levels, showing that the company is effectively addressing operational challenges. This focus on enhancing supply chain management and reducing shrink is expected to boost profitability further.
How Inflation and E-commerce Are Shaping UNFI’s Future
A notable development is a decline in inflation rates, which eased some economic pressures on United Natural. Product inflation dropped to around 2%. The company anticipates this trend to continue. However, food prices remain elevated, which could still impact consumer spending.
In addition to managing inflation, UNFI is leveraging its e-commerce strengths. The company introduced several digital platforms, including the Community Marketplace, designed to help emerging brands reach grocery wholesalers. This initiative allows customers to access a broader range of products and supports the company's goal of expanding its e-commerce presence.
Ongoing Struggles for United Natural
Despite these positive developments, United Natural Foods faces significant challenges. The retail segment has been fragile, with a 4.5% year-over-year decline in sales in third-quarter fiscal 2024. This downturn stemmed from reduced consumer spending and heightened price sensitivity. The retail sector is also experiencing increased competition and shifting consumer preferences, which are affecting overall sales performance.
Margin pressure is another concern. The company's gross margin contracted slightly in the quarter, reflecting reduced procurement gains and a lower retail gross margin. Persistent margin pressures are likely to continue impacting profitability, making it a critical area to watch.
United Natural has struggled with reduced volumes as consumers turn to discount stores and online shopping for better value. The company’s quarterly net sales registered a minimal decline, but ongoing volume declines could further strain performance.
What Should UNFI Investors Do Next?
In summary, United Natural Foods is actively working to improve its financial health through strategic investments and operational enhancements. While there are promising signs, such as reduced shrinkage and e-commerce growth, the company must address significant challenges, including margin pressures and weak retail performance. We suggest that investors maintain a cautious approach in approaching UNFI stock, balancing potential rewards with the risks inherent in the current situation.
The Zacks Rank #3 (Hold) company’s shares have increased 6.5% in the past three months compared with the industry’s 8.6% growth.
Top 3 Staple Stocks
Here, we have highlighted three better-ranked food stocks, namely, The Chef's Warehouse CHEF, Ollie's Bargain Outlet OLLI and Flowers Foods FLO.
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 Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings each indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, 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 each indicates a rise of around 8.7% and 12.7%, respectively, from the year-earlier figures.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings each implies growth of around 1% and 4.2%, respectively, from the year-ago reported numbers.
Zacks Investment Research
Molson Coors Beverage Company TAP appears to be in good shape, thanks to the immense strength in its brands and strong performances across its portfolio. Smooth progress of the Acceleration Plan and the premiumization of its portfolio have been aiding results. The company has been seeing strong success in EMEA&APAC, Canada and Latin America. However, in the United States, it has plans on track to drive improvement.
Let us delve deeper.
Details on Molson Coors’ Strategies
Last year, Molson Coors introduced its Acceleration Plan, which had been built upon the success accomplished under its Revitalization Plan implemented in 2019. The plan looks to deliver growth in the coming years. The initiative revolves around five pillars, including core power brands’ growth, portfolio premiumization, beyond beer expansion, investment in capabilities and support to its people and communities.
The company has been aggressively focusing on portfolio premiumization, in both Beer and Beyond Beer, to boost the shape of its product portfolio. It has also been making impressive innovations, especially in Beyond Beer. TAP’s goal for its Above Premium portfolio is to reach nearly one-third of its brand net revenues, excluding contract brewing, in the medium term.
Molson Coors is among the largest brewers in the world. With a view to accelerate portfolio premiumization, it has been aggressively growing its above-premium portfolio. The company remains committed to growing its market share through innovation and premiumization.
TAP’s Brand Performance
Molson Coors consistently focuses on growing its core power brands’ revenues. The company’s core power brands comprise Coors Light, Miller Lite and Coors Banquet in the United States and key brands in the international markets such as Molson trademark in Canada, Carling in the United Kingdom and Ozujsko in Croatia.
Strength in Coors Light, Miller Lite and Coors Banquet appears encouraging. In the United States, Coors Light, Miller Lite and Coors Banquet, on a combined basis, volume share fell 0.5 share point of industry in the second quarter from a year ago. However, these brands were up 2 full share points from the second quarter of 2022, reflecting that the company retained about 80% of its peak share gains on the core power brands.
Among these brands, Coors Banquet is performing really well. It registered brand volume growth of 13% in the first half of 2024 and gained share at the fastest rate in the top 15 brands within the beer category. The company also successfully launched a core power brand, Caraiman, in Romania, which has reached about 150,000 hectoliters since March. Further, it is also gaining from the successful launch of Madri, which registered revenue growth in double digits in the reported quarter.
Bottlenecks to TAP’s Growth
Molson Coors has been witnessing cost inflation with respect to materials and manufacturing expenses. In second-quarter 2024, the underlying cost of goods sold per hectoliter rose 2.9% in constant currency, mainly owing to cost inflation with respect to materials and manufacturing costs, deleveraged volumes and unfavorable mix on lower contract brewing volumes in the Americas segment, somewhat offset by cost savings. Though inflation moderated, the same remains a headwind in 2024.
The continued exit of Pabst contract brewing volumes is impacting the company’s results. This reduced second-quarter 2024 financial volumes by 580,000 hectoliters with decreases accelerating from the prior quarter. Also, first-half 2024 financial volumes were more than 900,000 hectoliters, indicating an above 50% fall in Pabst contract volume from the half of 2023. Management cited that Pabst is a headwind to total volume and net sales in the near term.
A Glance at Molson Coors’ Performance
Despite the headwinds, Molson Coors’ shares have been performing well on the bourses. Shares of this global manufacturer and seller of beer and other beverage products have gained 8% in the past three months compared with the industry’s 4.7% growth.
The company put up a stellar show in the second quarter, wherein the bottom and top lines beat the Zacks Consensus Estimate. Adjusted earnings of $1.92 per share increased 7.9% year over year and surpassed the Zacks Consensus Estimate of $1.68. Gross profit increased 9.1% year over year and the gross margin expanded 310 basis points to 34.6%. Solid results in the EMEA & APAC segment, owing to favorable net pricing, premiumization and higher brand volumes, have bolstered the overall performance.
The company has commenced a new multiyear project in the United Kingdom to boost its brewing and packaging capacity. Management projects 2024 net sales to increase in the low-single digits year over year on a constant-currency basis. Underlying earnings per share are estimated to rise in the mid-single digits. The aforementioned strengths are likely to boost TAP’s performance, thereby retaining the Zacks Rank #3 (Hold) company’s momentum in the future.
Stocks to Consider
The Chef's Warehouse CHEF, a distributor of specialty food products in the United States, 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 Estimate for CHEF’s current financial-year sales and earnings per share (EPS) indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods FLO offers baked items and has a Zacks Rank # 2 (Buy). It has a trailing four-quarter average earnings surprise of 1.9%.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings implies growth of 1% and 4.2%, respectively, from the year-ago reported numbers.
Utz Brands Inc. UTZ, which manufactures a diverse portfolio of salty snacks, currently carries a Zacks Rank of 2. UTZ has a trailing four-quarter earnings surprise of 5%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year EPS indicates growth of 28.1% from the year-ago reported number.
Zacks Investment Research
The Kroger Co. KR reported second-quarter fiscal 2024 results, with sales falling short of the Zacks Consensus Estimate and earnings beating the same. Although revenues grew year over year, earnings declined compared to the same period last year. Decent sales performance in the first two quarters gave management confidence to lift the lower end of the full-year identical sales without fuel view by 50 basis points.
Kroger's well-defined customer segmentation strategy, emphasis on value and focus on its 'Our Brands' portfolio have enabled it to maintain a competitive position. The company remains committed to its core strengths, which include offering an array of fresh products, providing personalized shopping experiences and fostering a seamless digital ecosystem. These initiatives are all aimed at sustaining Kroger's positive momentum and continued growth.
Analyzing Kroger’s Q2 Outcome
Kroger reported adjusted earnings of 93 cents a share, which came a penny ahead of the Zacks Consensus Estimate but declined from 96 cents reported in the same quarter last year.
Total sales of $33,912 million came below the Zacks Consensus Estimate of $34,069 million but improved from $33,853 million reported in the year-ago period. We note that identical sales without fuel rose 1.2%. Digital sales grew 11% during the quarter under discussion.
We note that the gross margin was 22.6% of sales. The FIFO gross margin rate, excluding fuel, expanded 42 basis points compared to the same period last year. The adjusted FIFO operating profit came in at $984 million, down from $989 million reported in the year-ago period.
The Kroger Co. Price, Consensus and EPS Surprise
The Kroger Co. price-consensus-eps-surprise-chart | The Kroger Co. Quote
KR’s Financial Snapshot
Kroger ended the quarter with cash of $233 million, total debt of $12,230 million and shareowners’ equity of $12,512 million. Net total debt decreased by $957 million over the last four quarters.
The company guided capital expenditures in the band of $3.6-$3.8 billion and expects to generate adjusted free cash flow between $2.5 billion and $2.7 billion in fiscal 2024.
Kroger Maintains FY2024 Earnings View
Kroger maintained its fiscal 2024 adjusted earnings guidance of $4.30 to $4.50 per share compared with adjusted earnings of $4.76 reported in fiscal 2023. Management continues to anticipate the adjusted FIFO operating profit in the band of $4.6-$4.8 billion compared with $5 billion reported in fiscal 2023.
However, Kroger now foresees identical sales without fuel to increase between 0.75% and 1.75% in fiscal 2024 compared with its earlier guidance of 0.25% to 1.75% growth.
Shares of this Zacks Rank #3 (Hold) company have risen 1.9% in the past three months compared with the industry’s growth of 17.1%.
Stocks Hogging in the Limelight
The Chefs' Warehouse CHEF is a premier distributor of specialty food products in the United States, the Middle East and Canada. It currently sports a Zacks Rank #1 (Strong Buy). CHEF 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 Zacks Consensus Estimate for Chefs' current financial-year sales and earnings suggests growth of around 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Sprouts Farmers SFM, which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1. SFM has a trailing four-quarter earnings surprise of 12%, on average.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of around 9.6% and 18.7%, respectively, from the year-ago reported numbers.
Flowers Foods FLO, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings calls for growth of around 1% and 4.2%, respectively, from the year-ago reported numbers.
Zacks Investment Research
Medifast, Inc. MED has seen its shares dive 48.9% in the past six months against the industry’s growth of 0.6%. This weight management and healthy living product company has also trailed the broader Zacks Consumer Staples sector and the S&P 500’s respective growth of 6.4% and 6.5%. Closing the trading session at $18.26 on Wednesday, the stock hovers close to its 52-week low of $17.73.
This significant decline in Medifast's stock price can be attributed to several factors that have weighed on the company’s performance and outlook. Let’s delve deeper.
Medifast Battles Customer Acquisition Challenges
Medifast has been encountering difficulties in attracting customers due to macroeconomic challenges, including intense competition in the health and wellness space, the disruptive effects of GLP-1 regimen adoption and a general slowdown in consumer spending. The weight loss market has experienced significant changes, with the adoption of medically supported weight loss accelerating more rapidly than anticipated.
In the second quarter of 2024, revenues of $168.9 million declined 43.1% year over year due to lesser active earning OPTAVIA Coaches and reduced productivity per Coach. The average revenue per active earning OPTAVIA Coach stood at $4,972, down 10.9% from $5,578 million due to lower customer acquisition.
The total number of active earning OPTAVIA Coaches fell 36.2% to 33,900 compared with 53,100 in the year-ago quarter. The abovementioned macroeconomic hurdles are likely to persist in the near term. The company expects third-quarter 2024 revenues to range between $125 million and $145 million, reflecting a continued decline in the number of active earning OPTAVIA Coaches. This decrease is attributed to near-term challenges in customer acquisition due to the growing acceptance of GLP-1 medications in the marketplace.
Operational Costs: A Concern for MED
Medifast has been battling rising SG&A costs for a while, which is denting its profits. As the operating landscape remains difficult, Medifast intends to make significant spending to boost customer acquisition. These initiatives involve strategic investments in marketing and product development, which are crucial for driving long-term growth. However, these investments may negatively affect EPS in the short term.
The company expects to incur a loss in the band of 5-70 cents per share for the third quarter. This forecast accounts for an anticipated expenditure of $9 million on company-led marketing initiatives and an additional $4 million for the coach convention.
Can Growth Strategies Turn the Tide for Medifast?
Medifast is strategically positioning itself to thrive in the rapidly evolving weight loss market, as the adoption of GLP-1 medications reshapes industry dynamics. Although short-term pressures are anticipated, Medifast's proactive initiatives are expected to positively impact its top-line performance by late this year and into 2025. With projections indicating that up to 20 million people in the United States could be using GLP-1 medications by 2030, Medifast is seizing this transformative opportunity by aligning its efforts with the market's evolving needs.
The company's holistic approach, integrating customers, coaches and clinicians through LifeMD, positions it to support GLP-1 users in achieving their long-term health goals. With its financial strength, strategic flexibility and expertise, Medifast is well-equipped to adapt and thrive in this evolving market, positioning itself effectively against competitors and capitalizing on substantial growth opportunities.
Medifast diligently pursues a strategic vision aimed at driving long-term growth. This vision encompasses several key initiatives, including the cultivation of product and program innovation, expansion into diverse market segments and geographies, refinement of coach and client experiences, harnessing in-depth data and insights and streamlining operational efficiency. In executing these strategies, Medifast places immense focus on the introduction of innovative and compelling products and programs.
The company adopts a systematic approach to penetrate global markets and explore adjacent product opportunities. A core element of Medifast's growth strategy involves scaling up through organizational enhancements, system optimizations, process improvements and strategic alliances. Medifast is focused on developing a culture that drives attraction, engagement and loyalty. Also, the company has been working toward data-driven decision-making.
How Should Investors Play MED Stock?
Medifast is currently navigating a challenging phase marked by significant stock declines, heightened competition and macroeconomic pressures affecting its customer acquisition and revenue growth. However, the company is taking proactive steps to realign its strategy and capitalize on emerging market opportunities. Potential investors should closely monitor Medifast’s progress and look for a more opportune moment to invest. For current shareholders, retaining the stock appears prudent, given the company’s long-term growth potential. Medifast presently carries a Zacks Rank #3 (Hold).
Top 3 Staple Stocks
Here, we have highlighted three better-ranked food stocks — The Chef's Warehouse CHEF, Ollie's Bargain Outlet OLLI and Flowers Foods FLO.
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 Estimate 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.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.7% and 12.7%, respectively, from the year-earlier figures.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings implies growth of around 1% and 4.2%, respectively, from the year-ago reported numbers.
Zacks Investment Research
Church & Dwight Co., Inc. CHD continues to solidify its market position through a strong brand portfolio and adept pricing strategies. Its focus on expanding online sales has aligned with shifting consumer behaviors. However, the company faces challenges, including rising marketing expenses and a slowdown in consumer spending, which affected second-quarter 2024 results. Currency fluctuations pose a risk to the company’s performance.
Shares of the company have risen 7.9% in the past year compared with the industry’s growth of 22.1%.
Factors Driving Church & Dwight’s Success
Church & Dwight’s strong brand equity provides the company with pricing power, allowing it to pass on cost increases to consumers with minimal impact on demand, supporting profitability. Favorable pricing remained an upside to the company’s organic sales in the second quarter of 2024. Organic sales increased 4.7% due to gains from volume to the tune of 3.5% and the favorable product mix and pricing of 1.2%. We expect pricing to be up 1% in 2024.
Online sales are a growing segment for Church & Dwight, now representing 21.2% of global sales (per the second quarter). The company's focus on expanding its direct-to-consumer platforms and optimizing its omnichannel presence ensures it can capture the ongoing shift in consumer purchasing behavior toward online channels.
Church & Dwight benefits from a robust portfolio of trusted consumer brands, such as Arm & Hammer, OxiClean and Trojan, which continue to deliver solid revenue performance across various segments. These brands are household staples, often regarded as essential goods, ensuring stable demand even during periods of economic uncertainty.
Church & Dwight has consistently demonstrated its ability to innovate in premium and niche product categories, such as the Flawless Beauty and Waterpik brands. These higher-margin, faster-growing categories have helped diversify the company's product offering and enhance earnings. Continued innovation and targeted acquisitions in these spaces position the company for growth beyond its traditional categories, providing upside potential for the stock.
Operational Efficiency Boosts CHD’s Gross Margin
Church & Dwight saw significant improvement in profitability, with the adjusted gross margin expanding by 150 basis points to 45.4% in the second quarter of 2024, driven by productivity gains, improved volume and a favorable product mix. Such operational efficiencies are crucial for mitigating inflationary pressures and higher manufacturing costs, demonstrating Church & Dwight’s focus on cost management and strategic pricing. This margin expansion offers strong support for future earnings growth.
The company increased its full-year forecast for adjusted gross margin expansion to approximately 100-110 bps, up from the previously expected 75 bps increase. Management expects higher product pricing, improved mix, increased volume and enhanced productivity to offset the rise in manufacturing costs.
Hurdles on CHD’s Way
Church & Dwight has been witnessing increasing marketing expenses for the past few quarters. The company anticipates marketing, as a percentage of sales, to be nearly 11% in 2024. Adjusted SG&A, as a percentage of sales, is projected to be higher year over year, up from the previous expectation of being flat. This upside reflects additional costs associated with the Graphico acquisition and higher incentive compensation than initially anticipated.
Church & Dwight is facing challenges related to consumer spending in the current environment. Recent trends indicate a slowdown in consumer consumption in June and July, where dollar consumption growth decelerated from 4.5% to approximately 2%. This deceleration is attributed to consumers adjusting their spending habits in response to extended economic pressures and rising prices. The company notes that while its portfolio of value and premium products is well-suited to navigate these shifting consumer patterns, the overall slowdown suggests that future growth may be more modest compared to the first half of the year.
Although the company anticipates its brands to outperform the categories in the second half of the year, it adjusted the organic revenue forecast to about 4% growth, down from the previous range of 4-5% during 2024. Reported sales growth is projected to be slightly lower, around 3.5%, due to the effects of divestitures and adverse currency fluctuations. Adjusted EPS growth is now expected to be at the lower end of the 8-9% range.
How Should Investors Play CHD Stock?
Church & Dwight's strong brand portfolio, pricing power and operational efficiencies have driven solid performance in online sales and higher-margin product categories. However, rising marketing costs, a slowdown in consumer spending and currency headwinds pose challenges that may limit near-term growth. Investors should weigh the company’s solid fundamentals against the potential hurdles in the current macroeconomic environment. For now, maintaining positions in the stock appears prudent. CHD currently carries a Zacks Rank #3 (Hold).
Top 3 Staple Stocks
Here, we have highlighted three better-ranked food stocks — The Chef's Warehouse CHEF, Ollie's Bargain Outlet OLLI and Flowers Foods FLO.
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 Estimate 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.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.7% and 12.7%, respectively, from the year-earlier figures.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings each implies growth of around 1% and 4.2%, respectively, from the year-ago reported numbers.
Zacks Investment Research
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