Citi dives into the packaged food sector in a new note to clients. Analyst David Driscoll points to margin expansion, tax reform and benign input cost inflation as positive factors. There's also the M&A overhang with food stocks that may or may not be baked into share price.
Top picks include Kellogg (K +0.4%), J.M. Smucker (SJM +0.6%), Hershey (HSY -0.1%) and Blue Buffalo Pet Products (BUFF +0.4%).
ConAgra Foods (CAG +0.9%) is upgraded to Buy from Neutral.
Perhaps most noteworthy of all, Citi takes the Sell sign off Kraft Heinz (KHC +0.7%) as it upgrades to Neutral on the expectation for a deal.
A ConAgra (NYSE:CAG) subsidiary pleads guilty and agrees to pay $11.2M to resolve a decade-long criminal investigation into a nationwide salmonella outbreak blamed on tainted peanut butter, the U.S. Department of Justice announced earlier today.
CAG was sentenced to pay an $8M criminal fine - representing the largest fine ever paid in a food safety case - and forfeit an additional $3.2M in assets.
In pleading guilty, the company admitted it introduced Peter Pan and private label peanut butter contaminated with salmonella into interstate commerce during the outbreak.
Conagra Brands (NYSE:CAG), formerly known as ConAgra Foods, has completed the previously announced separation of its Lamb Weston business, which will begin trading as an independent company on the NYSE under ticker symbol "LW."
The name change to Conagra Brands reflects a new direction as a singularly focused, consumer branded food company. Annualized net sales are expected to be approximately $8B.
Keep an eye on ConAgra Foods (NYSE:CAG) with the company's Investor Day event in full swing.
The early word from management is that the food giant will consider pruning more brands from its portfolio. CEO Sean Connolly also noted that ConAgra aims to be 91% branded food after the Lamb Weston spinoff.
Last week, RBC Capital suggested ConAgra was interested in a major acquisition such as Pinnacle Foods, but so far nothing from ConAgra execs leans in that direction.
Pinnacle Foods (PF +1.9%) is higher after a fresh analyst note from RBC Capital mentions the food company as a possible acquisition target of ConAgra (CAG +1.3%). Pinnacle currently trades with a market cap of right at $6B, while ConAgra's market value is $20.6B.
ConAgra is rated at Outperform by RBC and assigned a price target of $54.