Miscellaneous Food Industry Outlook: Costs Raise Concerns

The Zacks Food-Miscellaneous industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #165 which places it at the bottom 36% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. Over the past year, the industry’s earnings estimate for 2019 has declined nearly 10.6%.

Despite the dull scenario of the industry, we will present a few stocks that one can buy or retain, given their solid growth endeavors that has helped them tide over the blues. But before that, it’s worth taking a look at the industry’s shareholder returns and current valuation.

Industry Lags on Stock Market Performance

The Zacks Food-Miscellaneous industry has lagged the Zacks S&P 500 composite over the past year, while the industry’s performance remained almost in-line with the broader Zacks Consumer Staples sector.

The industry has declined 16.7% over this period, as compared with the S&P 500’s decline of 5%. Meanwhile, the broader sector has fallen roughly 16.5%.

One-Year Price Performance

Industry’s Current Valuation

On the basis of forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing consumer staples stocks, the industry is currently trading at 17.13X compared with the S&P 500’s 17.09X and the sector’s 19.18X.

Over the past five years, the industry has traded as high as 25.27X, at the median of 21.45X, and at a low of 17.13X, as the chart below shows.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this ...

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