Piper Sandler sees modest GLP-1 impact on food sector amid consumer pressure

Investing.com - Piper Sandler has updated its analysis on the Food and Beverage sector, highlighting modest impacts from GLP-1 weight loss drugs while noting ongoing consumer pressure heading into the third quarter of 2025. According to InvestingPro data, the sector faces varying challenges, with companies like Constellation Brands showing mixed signals - a solid Financial Health Score of 2.51 (GOOD) despite recent market pressures.

The firm estimates GLP-1 drugs will create annual headwinds of only 20-30 basis points to total packaged food sales, significantly below the 1.5-2.0 percentage point average declines seen in recent years among large cap food companies. Piper Sandler identifies inflation as a more significant factor currently affecting consumer purchasing behavior.

Companies best positioned to weather these trends include Coca-Cola Consolidated (NASDAQ:COCO), Celsius (NASDAQ:CELH), Monster Beverage (NASDAQ:MNST), Coca-Cola (NYSE:KO), Keurig Dr Pepper (NASDAQ:KDP), PepsiCo’s beverage division, and Freshpet (NASDAQ:FRPT). The firm sees most risk for Hershey (NYSE:HSY), Kellogg (NYSE:K), PepsiCo’s food division, and Utz Brands (NYSE:UTZ). For deeper insights into these companies’ valuations and financial health, InvestingPro offers comprehensive analysis and Fair Value estimates for over 1,400 US stocks.

Looking specifically at third quarter 2025 earnings, Piper Sandler notes Utz Brands and Post Holdings (NYSE:POST) appear well-positioned to meet or exceed expectations. Utz is benefiting from momentum in club channels, while Post’s quarter looks on track with expectations focused on fiscal 2026 outlook. InvestingPro analysis reveals that companies in this sector are showing varying levels of profitability, with key metrics like gross profit margins averaging around 52% for industry leaders.

The firm identifies Tyson Foods (NYSE:TSN) as facing the most downside risk due to headwinds in both beef and chicken segments, which could drive a below-expectation fiscal 2026 outlook. Kraft Heinz (NASDAQ:KHC) also faces broad pressure across all segments, while Hershey may benefit from falling cocoa costs and Canada tariff relief.

In other recent news, Constellation Brands reported its second-quarter fiscal 2026 earnings, achieving an earnings per share (EPS) of $3.63, surpassing the consensus estimate of $3.46. This EPS beat was largely attributed to unexpected cost savings in its Beer segment, contributing approximately $0.14 to the EPS outperformance. Despite this, the company’s revenue came in at $2.48 billion, slightly below the anticipated $2.51 billion. Analysts from firms such as Bernstein, RBC Capital, and BMO Capital have reiterated their Outperform ratings on Constellation Brands, with price targets ranging from $190.00 to $200.00. RBC Capital noted the company’s solid performance amid challenging beer depletions and macroeconomic factors, highlighting strong beer margins. Bernstein’s analysis focused on potential impacts of immigration policy on Hispanic consumers’ purchasing behaviors, which could affect sales volumes. These recent developments reflect a complex landscape for Constellation Brands, with analysts maintaining a positive outlook despite some challenges.

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