Commodities & Metals

Food Processing Stocks With Most Upside (ADM, BG, TSN, SFD, CPO, CAG, KFT, SLE, GIS, K)

Smithfield Foods Inc. (NYSE: SFD) has a median target price of $24.50 from 12 brokers. Shares are trading today at $22.41, for an implied gain of $2.09, or 9%. Smithfield’s forward P/E is 9.16 and the company does not pay a dividend. The stock’s 52-week trading range is $15.93-$24.93, and at today’s price that’s about 41% above its 52-week low and 10% below the 52-week high.

Smithfield’s CEO made an open market purchase of 50,000 shares in early October, at an average price of $18.71/share. That’s a nifty 20% profit in about a month, and the company’s share continue to inch toward the price target. If only the company paid a dividend.

Corn Products International Inc. (NYSE: CPO) has a median target price of $60.00 from 9 brokers. Shares are trading today at $50.31, for an implied gain of $9.69, or 19%. Corn Products’ forward P/E is 10 and the company pays a dividend yield of 1.3%. The stock’s 52-week trading range is $36.65-$59.50, and at today’s price that’s about 37% above its 52-week low and 15% below the 52-week high.

Corn Products beat earnings estimates last week and raised its full-year EPS guidance from $4.85-$5.15 to $5.05-%5.15, well above current analyst estimates of $4.54. The company also noted that it had been able to raise prices to offset the cost increases on its raw materials.

ConAgra Foods, Inc. (NYSE: CAG) has a median target price of $26.00 from 10 brokers. Shares are trading today at $25.26, for an implied gain of $0.74, or 3%. ConAgra’s forward P/E is 15.46 and the company pays a dividend yield of 3.8%. The stock’s 52-week trading range is $21.02-$26.60, and at today’s price that’s about 20% above its 52-week low and 5% below the 52-week high.

ConAgra recently boosted its dividend by about 4%, to $0.96 annually. The company posts the highest dividend yield among the shares we’re looking at today, and its strong consumer brands should continue to drive the share price through the current target.

Kraft Inc. (NYSE: KFT) has a median target price of $40.00 from 17 brokers. Shares are trading today at $35.92, for an implied gain of $4.08, or 11%. Kraft’s forward P/E is 14.3 and the company pays a dividend yield of 3.4%. The stock’s 52-week trading range is $29.80-$36.30, and at today’s price that’s about 21% above its 52-week low and 1% below the 52-week high.

Ever since Kraft announced that it would split itself into a snack foods company and a grocery business, the company’s performance has improved. The split is expected to be complete by the end of 2012, and it will be interesting to see if the parts will do as well as the whole is now doing.

Sara Lee Corp. (NYSE: SLE) has a median target price of $19.00 from 9 brokers. Shares are trading today at $18.55, for an implied gain of $0.45, or 2%. Kraft’s forward P/E is 17.9 and the company pays a dividend yield of 2.6%. The stock’s 52-week trading range is $14.48-$20.26, and at today’s price that’s about 28% above its 52-week low and 8% below the 52-week high.

Sara Lee reported adjusted EPS today that beat the consensus estimate of $0.17 by a penny. Unadjusted, however, the company posted an EPS loss of -$0.37, attributable to the company’s recent shedding of some of its businesses. Like Kraft, it will split into two companies in a spin-off that is expected to close by mid-20123.

General Mills, Inc. (NYSE: GIS) has a median target price of $42.00 from 15 brokers. Shares are trading today at $38.70, for an implied gain of $3.30, or nearly 9%. General Mills’ forward P/E is 13.67 and the company pays a dividend yield of 3.2%. The stock’s 52-week trading range is $34.54-$40.25, and at today’s price that’s about 12% above its 52-week low and 4% below the 52-week high.

General Mills’ share price has fallen by about $1.00 in the last month for no really good reason. It has been able to cover the increases in its raw materials costs by raising prices, and low inflation expectations for next year are a positive for the company’s profit outlook.

Kellogg Company (NYSE: K) has a median target price of $60.00 from 16 brokers. Shares are trading today at $50.10, for an implied gain of $9.90, or nearly 20%. Kellogg’s forward P/E is 13.27 and the company pays a dividend yield of 3.2%. The stock’s 52-week trading range is $48.51-$57.70, and at today’s price that’s about 3% above its 52-week low and 13% below the 52-week high.

Kellogg shares closed yesterday at $54.04, but are getting pounded today following a disappointing earnings report. The company also lowered its full-year EPS guidance to a maximum of $3.40, well below the current consensus estimate of $3.48. Earnings were hit as the company is spending money to address infrastructure problems.

Paul Ausick

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