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Stock Strategist

Hostess' Brand Strength Offsets Health Trend

Zain Akbari, CFA

 Hostess Brands’ (TWNK) brand strength and prospects for continued return generation despite challenging category dynamics are often misunderstood, in our opinion.

While we expect the U.S. health food trend to persist and strain the sweet baked goods segment, we argue that Hostess is better suited than its peers to navigate this, thanks to its premium brands with demonstrated pricing power monetized through a low-cost, flexible production and distribution infrastructure. Memories are fresh of Hostess’ recent woes, which culminated in liquidation in 2012, but we believe resurgence under a strong management team has left the company with financial flexibility and the resources to invest in innovation and its brands.

Zain Akbari, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.