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These Food Stocks Hit 52-Week High: Is Room for Growth Left?

Zacks Equity Research

Companies in the Zacks Food-Miscellaneous industry are focused on undertaking regular innovations, enhancing brands through efficient marketing and refining portfolio via prudent buyouts and divestitures. While rising costs and competition remain major hurdles to food players, their stringent cost-containment efforts and restructuring plans keep them going.

Backed by such upsides, the Food – Miscellaneous industry has increased 9% in the past three months compared with the S&P 500 index’s 13% growth. Markedly,  the industry ranks among the top 39% (99 of 256) out of more than 250 Zacks industries.

Well, General Mills, Inc. GIS and TreeHouse Foods, Inc. THS are two such players from the food space that are benefiting from the afore-mentioned strategies. Notably, both the stocks hit a 52-week high on Mar 29 driven by their respective growth strategies. General Mills carries a Zacks Rank #2 (Buy), whereas TreeHouse Foods has a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

What’s Pushing General Mills’ Shares Higher?

Shares of General Mills hit a 52-week high of $51.96, though it closed slightly lower at $51.75. Overall, the stock has surged a whopping 34.7% in a three-month time frame. The company appears promising on the back of its focus on portfolio refinement efforts, Consumer First strategy and solid cost-reduction initiatives. These factors helped it to deliver impressive third-quarter fiscal 2019 results.



Delving deeper, we note that the company is focused on reshaping its portfolio via buyouts and divestitures. In April 2018, the company acquired Blue Buffalo Pet Products and is on track to integrate the same. Management anticipates sales from Blue Buffalo and segment operating profit to grow at a significant pace in the fiscal fourth quarter, courtesy of distribution expansion in the Food, Drug and Mass (FDM) channel. Moreover, the company is focused on improving its e-commerce channel, given its rapid acceleration.

Further, General Mills is on track with its Consumer First strategy as well as key global growth strategies for consistent sales growth. Also, the company is pursuing many initiatives focused on improving operational efficiency to generate cost savings and support its key growth strategies. In this regard, it is imperative to mention that the company remains on track with its Holistic Margin Management (HMM), which aided gross and operating margin to expand during the third quarter of fiscal 2019. Management expects increased savings from this program to aid margin expansion for Blue Buffalo in fourth-quarter fiscal 2019. Additionally, management had earlier stated that it expects the cost of goods HMM savings of roughly $450 million in fiscal 2019.

What’s Driving TreeHouse Foods?

Shares of TreeHouse Foods touched a 52-week high of $64.69, closing a bit lower at $64.55. Impressively, the stock has rallied 27.3% in the past three months. Solid restructuring initiatives, focus on acquisitions and efforts to enhance organic food offerings have been working in favor of the company.

Also, the company is gaining from its solid restructuring initiatives. TreeHouse Foods’ Structure to Win program focuses on aligning the company’s SG&A expenses with its division structures. This, in turn, is likely to enrich customers’ experience.

Also, the company is on track with its TreeHouse 2020 strategic plan, which was announced in second-quarter 2017. Apart from cost savings, the initiative is expected to manage the company’s portfolio, and optimize production and supply chain. The plan aims to improve TreeHouse Foods’ operating margin by 300 basis points (bps) by the end of 2020, by undertaking complete business integration and expense reduction.

Given consumers’ changing preferences, the company has increased focus on organic foods. Notably, TreeHouse Foods has witnessed positive comparable store sales growth trends in food away from home outlets, which mainly focus on clean ingredients and labels. This results in higher demand for “natural” or organic type products. Moreover, premium, better for you, natural and organic offerings now form more than 21% of the company’s sales. Along with these factors, TreeHouse Foods’ focus on expanding its product offerings through acquisitions is commendable.

We expect such efforts to help both these renowned food players to retain their robust momentum.

Don’t Miss These Solid Food Stocks

Medifast, Inc. MED has a long-term earnings growth rate of 20% and a Zacks Rank #1.

United Natural Foods, Inc. UNFI delivered average positive earnings surprise of 16.7% in the trailing four quarters. It has a long-term earnings growth rate of 7.4% and a Zacks Rank of 2.

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