COCO - Food inflation is moderating - watch these stocks
2023-07-12 08:42:33 ET
Consumer prices rose 3.0% in June in comparison to last year to cool off from the 4.0% pace in May. Core CPI was up 4.8% year-over-year and was up 0.2% on a month-to-month basis to miss the consensus estimate of +0.3%.
Overall, food prices were up 5.7% in June from a year ago and tracked just 0.1% higher from May. Some of the food categories that are still showing elevated levels of inflation include cereals and bakery products (+8.8%), bread (+11.5), frozen fruits and vegetables (+12.5%), and candy and chewing gum margarine (+13.2%). Meat prices were only up 0.6% year-over-year, with pork prices actually dropping by 3.8%. Milk prices were also down 1.9% from a year ago and down 0.3% from the level seen in May.
What about eggs? Egg prices were down 7.9% when compared to a year ago and were 7.3% lower from May. Cal-Maine ( CALM ) is in general has been one of the biggest beneficiaries of higher egg prices.
What to watch: Returns for packaged food and beverage stocks have moderated in 2023, although the three-year return for Invesco Dynamic Food & Beverage ETF ( NYSEARCA: PBJ ) is still ahead of the broad market. The upcoming earnings reports from food companies are seen as key to setting the tone for the back half of the year - including the latest guidance from TreeHouse Foods ( THS ), SunOpta ( STKL ), Lamb Weston ( LW ), WestRock Coffee Company ( WEST ), Kraft Heinz ( KHC ), Hormel Foods ( HRL ), J.M. Smucker ( SJM ), Hostess Brands ( TWNK ), Flower Foods ( FLO ), BellRing Brands ( BRBR ), MGP Ingredients ( MGPI ), Post Holdings ( POST ), General Mills ( GIS ), Campbell Soup ( CPB ), Lifeway Foods ( LWAY ), Lancaster Colony ( LANC ), Bridgford Foods Corporation ( BRID ), TreeHouse Foods ( THS ), Kellogg ( K ), ConAgra Brands ( CAG ), Celsius Holdings ( CELH ), Vita Coco ( COCO ), and PepsiCo ( PEP ). Elevated food prices have also been providing a margin lift to major retailers. Watch Walmart ( WMT ), Target ( TGT ), Kroger ( KR ), Albertsons ( ACI ), Sprouts Farmers Market ( SFM ), and Costco ( COST ) for margin pressure if prices keep moderating.
More on food stocks:
- Campbell Soup: Kick The Can
- General Mills: Promising Opportunity With A High Price Tag
- Campbell Soup: Buy The Drop On This Consumer Staple
- Conagra: Our Investment Thesis Became Less Bullish, Rating Downgrade
- Seeking Alpha Quant Ratings across the food sector
For further details see:
Food inflation is moderating - watch these stocks