Morgan Stanley advises that investors be careful buying into the recent share price decline of food stocks.
"We continue to see material EBIT downside vs. consensus in large cap food, with reinvestment needed to combat topline pressure points as cost savings are dissipating," warns the MS analyst team. In a nutshell, Morgan Stanley doesn't see valuation as compelling across the sector.
The firm has Equal-weight ratings on General Mills (GIS +1.5%), Kellogg (K), Mondelez International (MDLZ +1.5%), Dean Foods (DF) and Hostess Brands (TWNK -0.2%). Underweight ratings are lined up on Kraft Heinz (KHC +2%), Hershey (HSY +1.2%) and J.M. Smucker (SJM +1.9%).
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