Craving Packaged Food Stocks For 2017? RBC Serves Up 4 Buy-Rated Names

RBC Capital Markets listed Kraft Heinz Co KHC, Mondelez International Inc MDLZ, Pinnacle Foods Inc PF and Conagra Brands Inc CAG as 2017 favorites in its latest analysis. Each company is expected to outperform industry benchmarks with respective price targets of $100, $54, $58 and $42.

Promotions, M&A Activity And Other Tailwinds

The analysts attributed potential growth to more effective promotional strategies and cost-saving programs coupled with mergers and acquisitions, such as anticipated buyouts of Mondelez by Kraft Heinz and Pinnacle Foods by Conagra Brands.

RBC also expects Kraft Heinz to be a critical player in the food market for 2017. The company's shares experienced 20 percent increases year-to-date, and its dominance in the market — set to expand with a Mondelez acquisition — could pressure competitors to embrace better management tactics.

U.S. Food Stocks And Trump Tax Reforms

In general, U.S. food stocks were up 12 percent year-to-date after having risen 15 percent in 2015.

Analysts reported a 12-percent, post-election rise in the weighted average food-market return, and they predicted an average 20-percent increase in earnings per share (EPS) following President-elect Donald Trump's anticipated tax reforms. Tyson Foods, Inc. TSN, Conagra, Campbell Soup Company CPB and Pinnacle were specifically forecast to win big under the new administration.

Still, potential immigration reform may influence industry performance in unpredictable ways through anticipated effects on produce inflation.

In 2017, analysts will continue to monitor accelerating fresh food deflation, declining deflation in energy and grain, and the effects of consumer trends, including the rise of small brands and shifts from "convenient meals and snack food categories."

Ratings And Price Targets

• Conagra: Outperform; $42 price target.
• Kraft Heinz: Outperform; $100 price target raised from $99.
• Mondelez: Outperform; $54 price target lowered from $56.
• Pinnacle Foods: Outperform; $58 price target.