Position Monitor Changes:
- Keurig Dr Pepper (KDP) remains on the Long Bias List.
- Flowers Foods (FLO) is being added to the Long Bias List.
- International Flavors & Fragrances (IFF) is being added to the Short Bias List.
- United Natural Foods (UNFI) is being added to the Short Bias List.
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For the webcast replay and materials CLICK HERE. |
We hosted an Idea Hunt call for Consumer Staples yesterday. We are on the hunt for longs and shorts where our estimates differ materially from consensus expectations and where the multiple could be re-rated. Consumer Staples stocks have generally performed well in Quad 4. In this Idea Hunt, we focused on four companies with share prices that have lagged the broader group. We presented our initial takeaways of whether the companies offer compelling value or if they are value traps. Many of our Best Ideas were initially vetted in an Idea Hunt. Our analysis includes a brief background, a competitive positioning analysis, an industry snapshot, a model comparison, and a valuation framework.
We added Flowers Foods to our Long Bias list. Keurig Dr Pepper remains on our Long Bias list. We added United Natural Foods and International Flavors & Fragrances to our Short Bias list.
First Take:
- Flowers Foods (FLO): is the second-largest producer and marketer of packaged bakery foods in the U.S. It owns many of the best-known bread and bakery brands. The company performed well during the pandemic, but inflationary price increases led to trade down into private label.
- International Flavors & Fragrances (IFF): is a creator and manufacturer of food, beverage, health & biosciences, scent and pharma solutions. IFF's products are sold principally to dairy, meat, beverage, snack, baked food, and personal care manufacturers. Consumer demand slowdown, customer destocking, and passing through price increases are current challenges to the business.
- Keurig Dr Pepper (KDP): is a manufacturer and distributor of a variety of beverages. It operates four segments: coffee systems (K-Cup systems), packaged beverages, beverage concentrates, and Latin American beverages. The beverage brands include Dr Pepper, 7UP, Canada Dry, Schweppes, and more. Price increases matching commodity inflation and other cost increases have led to volatility in results and margin pressure. The Keurig business has had volatility driven by comparisons and launches. Investors remain concerned about price elasticity and competitor pricing.
- United Natural Foods (UNFI): is the largest distributor of natural, organic, and specialty foods. Headwinds to the business include higher commodity inflation, reduced government benefits, higher retail shrink, and lapping procurement gains.
