Jefferies Says Stay-at-Home Scenario Huge for 6 Stocks Rated Buy

Companies and Brands

Published: March 17, 2020 7:57 am

Last Updated: March 17, 2020 10:24 am

This past weekend eerily reminded citizens in the United States of the difficult times after the 9/11 attacks in 2001. Back then, the airlines were shut down, and many were too scared to travel anyway, as the shock and death toll from the attacks drove people inside where they watched in horror at first the attacks and then the aftermath. The COVID-19 scare is doing the same, while slowly at first, but now picking up speed, society is shutting down. No pro or amateur sports, schools are closed, restaurants and bars are being told to close, so pretty much life as we know it is being put on hold until the virus starts to wane.

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A new Jefferies report notes that the “food at home” buying is sure to jump. In fact, some stores’ supply chains are being taxed to keep delivering as panic buying has left many grocery shelves empty. The analysts noted this in the report:

Analysis suggests food-at-home could see incremental $90 billion in retail dollars March through May. If food-at-home were to increase to 70% of total U.S. food retail sales from March to May this year (from a pre-COVID-19 50% level), we estimate an incremental ~ $90 billion in food-at-home revenues (~7x the size of Kellogg globally). Food-at-home peaked at ~56% of total U.S. food retail sales during the 2009 Great Recession, which was financially based, not virally-driven. And given the shift to at-home food purchases seems much more than a week-long pantry load, we foresee an ongoing top line tailwind in the near term for many companies under our coverage.

Six top stocks that are rated Buy at Jefferies could be poised for solid gains from the current crisis. The situation is most likely temporary, but it may inject some big-time sales into the top lines of these companies in the second quarter and perhaps beyond.

BellRing Brands

This off-the-radar stock was hammered Monday but still trades above the 52-week low. BellRing Brands Inc. (NYSE: BRBR) is a packaged food and beverage company offering consumers convenient and nutritious products.

The company’s portfolio consists of ready-to-drink protein shakes with its Premier Protein brand, protein powder with Dymatize. and protein bars with PowerBar. BellRing sells products both in the United States and internationally, primarily in club channels, with exposure to FDM, specialty and e-commerce.

Jefferies lowered its price target to $21 from $23, while the Wall Street consensus target is $24.15. The shares closed Monday’s brutal trading session at $17.10, down a mild 5.45%, compared to the double-digit index losses.

Hostess Brands

This well-known company could also see a nice bump from the stay-at-home scenarios, and we all have had Twinkies. Hostess Brands Inc. (NASDAQ: TWNK) engages in developing, manufacturing, marketing, selling and distributing baked goods. It operates through following segments.

The Sweet Baked Goods segment consists of fresh and frozen baked goods and bread products that are sold under the Hostess, Dolly Madison, Cloverhill and Big Texas brands. The In-Store Bakery segment consists of Superior on Main branded and store-branded products sold through the in-store bakery section of grocery and club stores.

The Jefferies price target dropped to $15 from $16, and the consensus figure is $16.20. The stock was last seen trading at $10.72, down just over 4% on Monday.

Mondelez

This consumer sector giant makes good sense for conservative accounts. Mondelez International Inc. (NASDAQ: MDLZ) manufactures and markets snack food and beverage products worldwide. It offers biscuits, including cookies, crackers and salted snacks; chocolates, and gums and candies; powdered beverages and coffee; and cheese and grocery products.

Its primary brand portfolio includes LU, Nabisco and Oreo biscuits; Cadbury, Cadbury Dairy Milk and Milka chocolates; Trident gum; Jacobs Kaffee; and Tang powdered beverages.

Mondelez sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets through direct store delivery, company-owned and satellite warehouses, distribution centers and other facilities, as well as through independent sales offices and agents.

Shareholders receive a 2.24% dividend. The $64 Jefferies price target was lowered to $61. The consensus target is $63.74, Mondelez stock closed Monday $45.10 a share, after a stunning 11.43% drop.