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Quarter-End Insights

Consumer Defensive: Hungering for Top-Line Gains

Even amid sluggish growth, pockets of value remain for long-term investors.

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  • Consumer defensive valuations strike us as a touch inflated, with the sector trading at about a 2% premium to our fair value estimates on a market-cap-weighted basis.
  • Although firms throughout the space remain laser-focused on driving further efficiencies, these efforts to extract costs have failed to offset languishing top-line trends.
  • As such, we aren't surprised that mergers and acquisitions were once again at the top of the agenda this quarter, with  Campbell Soup (CPB) poaching Snyder's-Lance (LNCE) and Hershey (HSY) scooping up Amplify Snack Brands.
  • This tepid growth has also whetted the appetite of activist investors looking to cook up change. 

 

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Erin Lash does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.