PBJ - Food prices are still high - will these stocks benefit?

2023-05-10 09:06:39 ET

One of the key pullouts from the April consumer price index report was that food prices remain elevated at a level 7.7% higher than a year ago for the month. The food at home index slipped 0.2% during the month from March and the food away from home index increased 0.4%.

Compared to a year ago, prices for cereal and bakery products (+12.4%), sugar and sweets (+10.5%), carbonated drinks (+11.9%), and frozen vegetables (+11.9%) were all notably higher. Eggs prices dipped 1.5% in April from March, but were still up 21.4% from a year ago. However, food inflation has moderated in some areas. Meat prices were only up 0.3%, with beef and pork actually lower than a year ago. Milk prices were only 1.6% higher from a year ago.

Weighing in on the earnings season from the food sector, Morgan Stanley analyst Dara Mohsenian noted that packaged food companies continued to see strong Q1 fundamentals driven by strong pricing power, modest demand elasticity with Q1 organic sales +14% on average so far, and gross margin upside driving EPS beats and upward FY guidance revisions. That adds up to pricing power for some foods giants that could prove to be sticky into Q2

Related stocks: General Mills ( GIS ), Hershey ( HSY ), Coca-Cola ( KO ), PepsiCo ( PEP ), Kraft Heinz ( KHC ), Kellogg ( K ), Campbell Soup ( CPB ), Cal-Maine Foods ( CALM ), Tyson Foods ( TSN ) and Mondelez International ( MDLZ ).

More on CPI:

• CPI rises 0.4% in April, but eases Y/Y, supporting Fed pause scenario
• Used auto prices rebound in latest CPI print
• S&P, Dow, Nasdaq futures gain with in-line April CPI reading

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