Idea Hunt today at 2 PM ET (MNST, THS)
We are hosting our Q2 Idea Hunt on Thursday, April 28 at 2 PM ET.
We will vet two Consumer Staples companies in our Idea Hunt, Monster Energy and TreeHouse Foods.
Our investment themes for Monster Energy:
Our investment themes for TreeHouse Foods:
Chicken feed doesn’t have the same meaning anymore (PPC)
Pilgrim’s Pride reported Q1 EPS of $1.18, topping consensus expectations of $.66. Sales increased 29.5% YOY, flat sequentially. Adjusted EBITDA margins expanded 400bps, improving from +130bps sequentially. The European business was the one area of disappointment.
We added Pilgrim’s Pride to our long list expecting a higher bid from JBS, consumer trade down to poultry, a tailwind from food service reopening, and an ability to increase prices from the spike in corn costs.
More cans (TAP)
KJ Can USA expects its new aluminum can plant in Nashua, New Hampshire to be fully operational in September. The company is targeting regional craft brewers for business. Minimum order sizes will be one truckload for printed cans compared to Ball’s new minimum of five truckloads. The plant’s capacity is expected to be several hundred million cans. Ball has announced a 28% price increase for 12 ounce printed cans and 19.5% for printed 16 ounce cans. The additional capacity will help constrain prices, but the plant is a small addition to a North American market exceeding 100 billion units annually.
Consumer confidence holds steady (GO)
U.S. consumer confidence fell slightly in April to 107.3 from 107.6 in March according to the Conference Board. Consumers’ short term outlook has held up despite headwinds from higher food and gas prices and the war in Ukraine. The lack of deterioration in consumers’ confidence seems to indicate spending behavior that also has been relatively stable. We would expect more change in behavior like buying more on promotion, changing brands, changing retailers, and adopting private label if confidence levels fell further. CPG companies continue to note that price elasticity seen so far has been less than historical patterns. Grocery Outlet will be a beneficiary as consumers look to save 4-70% on their grocery purchases.
