Investors regained their appetite for underperforming food stocks Wednesday after several leading names in the group outlined at the 2021 Barclays Global Consumer Staples Conference how they planned to combat rising input costs. These ongoing concerns have seen the sector's flagship bellwether exchange traded fund (ETF), the Consumer Staples Select Sector SPDR Fund (XLP), underperform the S&P 500 by around 4% over the past three months. However, the fund outpaced the large-cap index by about 1% on Wednesday amid reassuring plans of action from prominent industry names.
- Leading food stocks rose Wednesday after companies said that they are raising prices to combat rising input costs.
- The Kraft Heinz (KHC) share price staged a strong rally from key support at $34, indicating a willingness from buyers to reenter the stock at these levels.
- General Mills (GIS) shares rallied from the lower trendline of a descending channel on above-average volume, increasing the potential for an upside breakout in upcoming trading sessions.
Below, we take a closer look at what The Kraft Heinz Company (KHC) and General Mills, Inc. (GIS) said at the conference about pricing and expenditure initiatives. We'll also turn to the charts to uncover possible trading opportunities.
The Kraft Heinz Company (KHC)
Well known for Heinz Baked Beans and Heinz Ketchup, Kraft Heinz ranks as the third-largest food and beverage manufacturer in North America behind PepsiCo, Inc. (PEP) and Nestlé S.A. (NSRGY). Kraft Heinz told investors that it has lifted prices across roughly two-thirds of its U.S. portfolio and is prepared to implement additional hikes should they be required to mitigate rising input costs. "We are implementing necessary pricing actions to manage the cost inflation we are currently seeing, including impacts likely to carry into next year," said Global Chief Financial Officer Paulo Basilio.
Additionally, the company said that it plans to beef up its marketing and sales capabilities to boost consumption and encourage repeat purchases while actively managing costs. As of Sept. 9, 2021, Kraft Heinz stock offers a tasty 4.49% dividend yield but is trading 13.89% lower year to date.
Despite an ominous "death cross" occurring on the chart yesterday, the share price staged a strong rally from crucial support at $34, indicating a willingness from buyers to reenter the stock at these levels. Active traders who take a long position here should anticipate a move back to major resistance at $44 and consider placing a stop-loss order beneath the weekly low at $35.38.
A death cross appears on a chart when a stock's short-term moving average crosses below its long-term moving average. Typically, the most common moving averages used in this pattern are the 50-day and 200-day moving averages.
General Mills, Inc. (GIS)
With a market capitalization of $36 billion, General Mills is a leading global packaged food company that produces snacks, cereal, yogurt, baking mixes, pet food, and ice cream. The parent of Cheerios, Yoplait, and Betty Crocker reiterated at the Barclays conference that it remains focused on pricing actions and other efficiency efforts to offset ingredient cost inflation and other increasing expenses. In July, the company noted that rising inflation is likely to add up to 7% of its cost of goods over the next fiscal year. However, the packaged food giant now anticipates full-year net sales and adjusted earnings to come in at the higher end of its prior estimates due to two months of price hikes across most of its grocery categories.
Management also said that it would continue executing its Accelerate strategy, which focuses on building brands, ongoing innovation, scaling opportunities, and community programs. General Mills stock yields 3.44% and has slipped 4.41% since early June.
The share price rallied from the lower trendline of a descending channel on above-average volume Wednesday, increasing the potential for an upside breakout in upcoming trading sessions. The stock also closed above the closely watched 50-day simple moving average (SMA), adding further bullish conviction to yesterday's move. Those who buy in this area should think about exiting in the zone of resistance between $64 and $65. Protect against a sudden reversal by setting a stop under yesterday's low at $57.93.
A descending channel is drawn by connecting the lower highs and lower lows of a security's price with parallel trendlines to show a downward trend.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.