Quarter-End Insights

Consumer Defensive: Hungering for Top-Line Gains

Erin Lash, CFA
  • 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. 

Erin Lash, CFA has a position in the following securities mentioned above: K KO. Find out about Morningstar's editorial policies.