Deutsche Bank's Recipe For Food Stock Investing In 2017

Analysts at Deutsche Bank initiated coverage on 13 U.S.-based food companies on Wednesday.

Veteran packaged food analyst Rob Dickerson has been following the sector for years. He argued in a report Wednesday that contrary to belief, U.S. Food stocks are performing just fine under the "Trump rally" and will continue to do so. Specifically, the commonly held notion that higher interest rates discourage investing in food companies doesn't hold true.

Dickerson noted that the Food sector modestly outperformed the market and the broader consumer staples group over the past three months, despite interest rates inching higher. In fact, the food sector has underperformed the market over the past one-, three- and five-year periods — at a time when interest rates were notably low.

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Dickerson also argued that even in an environment of rising interest rates, as is expected throughout 2017, isn't reason enough for the Food sector to underperform. The analyst highlighted several positive factors that will support growth, including continued sector consolidation, top-line operating deleverage, higher brand portfolio investment needs and restructuring initiatives.

With that said, the analyst sees an approximate 9 percent market-cap weighted upside for the U.S.-based food sector over the next year.

Initiation Coverage

Initiated At Buy

• Conagra Brands Inc CAG: $46 price target.
• Hostess Brands, Inc. TWNK: $18 price target.
• Kraft Heinz Co KHC: $91 price target.
• Nomad Foods Limited Ordinary Shares NOMD: $13 price target.
• Pinnacle Foods Inc PF: $61 price target.
• Snyder's-Lance Inc LNCE: $43 price target.

Initiated At Hold

• Campbell Soup Company CPB: $65 price target.
• General Mills, Inc. GIS: $61 price target.
• Hershey Co HSY: $115 price target.
• J M Smucker Co SJM: $145 price target.
• Kellogg Company K: $79 price target.
• McCormick & Company, Incorporated MKC: $102 price target.
• Mondelez International Inc MDLZ: $49 price target.