UPDATE: Goldman loses appetite for food stocks, downgrades Kraft Heinz
By Ciara Linnane, MarketWatch
Goldman downgrades Kraft Heinz to neutral, sticks with sell ratings on J.M. Smucker, General Mills and Procter and Gamble
Goldman Sachs downgraded the stock of food company Kraft Heinz Co. to neutral from buy Wednesday, and said a squeeze on margins is putting earnings estimates at risk.
The move came as part of a broader recalibration of Goldman's estimates and price targets for the food and household and personal care (HPC) sectors against a backdrop of rising input costs.
"While FX pressure has abated and sales trends are improving for many, we see increasing risk to margin expectations as renewed input cost pressure sustains (or mounts) for many as pricing power is challenged, particularly in the U.S.," analysts led by Jason English wrote in a note.
Goldman is sticking with sell ratings on J.M. Smucker Co. (SJM), General Mills Inc. (GIS), Church & Dwight Co. Inc. (CHD) and Procter and Gamble Co.(PG). The latter two stocks "have greater absolute downside given elevated valuation.
"From a long-perspective, our bias remains tilted toward M&A optionality stories (e.g., Pinnacle Foods (PF), Kimberly-Clark Corp.(KMB)) and multi-national companies with exposure to outsized growth potential in an increasingly growth starved universe (e.g., (MDLZ) Estée Lauder (EL) )," said the note.
It singled out Mondelez as being especially well-placed for growth with a compelling valuation. The price estimates changes can be found in the table below: