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Investing.com -- JP Morgan assumed coverage of U.S. food producers, retailers and agricultural product companies, naming McCormick (NYSE:MKC), Albertsons (NYSE:ACI), Hormel and Smucker as its top picks while cautioning on Beyond Meat (NASDAQ:BYND) and General Mills (NYSE:GIS).
The brokerage said it now prefers food retailers over producers, expecting supermarkets to benefit from sticky inflation and consumers shifting toward higher-margin, healthier items.
It sees food producers facing slower growth, market-share losses and cost pressures, though much of the earnings risk is already reflected in the stocks.
Among individual ratings, JP Morgan assigned Overweight to McCormick, Albertsons, Hormel and Smucker, and kept Beyond Meat and General Mills at Underweight.
It said McCormick looks attractive after a recent pullback, and expects Albertsons to improve earnings through operational fixes after its failed merger with Kroger (NYSE:KR).
Hormel was cited for a rebound in turkey prices and improving margins at its Planters nuts brand, while Smucker is expected to grow sales with its Uncrustables snack line and a gradual recovery in pet food.
The analysts remain cautious on Beyond Meat due to falling demand and cash burn, and see limited upside in General Mills given weak sales trends and a stretched valuation versus peers.
JP Morgan said the outlook for ag products firms remains uncertain and depends largely on U.S. biofuel policy still under review. Overall, it said food retailers are best positioned in the current backdrop, while food producers face the toughest environment.