NEW YORK (AP) — Food manufacturers have a very good year ahead of them, according to Citi analyst David Driscoll.
Consumers are eating at home more often, the popularity of store-brands is slowing and increasing advertising spending and product creation all bode well for food makers' profitability, Driscoll wrote in a research note. And with lower debt levels on manufacturer's balance sheets, the year is ripe for share repurchases and mergers and acquisitions.
Food manufacturers have "all the ingredients" to see above-average earnings growth during 2010, making it a compelling investment year, he said.
Citi anticipates several key companies to grow their earnings per share 10 percent for the year, up from 6 percent growth in 2009.
"We see great things in store for the food manufacturers in 2010," Driscoll wrote.
The recession has helped some food makers as consumers shied away from restaurants and began to cook at home. And some of the recent challenges to profitability—the stronger dollar and commodity costs—are expected to abate some in the coming year.
Driscoll pointed to Kellogg Co. and General Mills Inc. He cited their strong product lineups that have helped establish them as leaders and have put them in position to deliver in the coming year. ConAgra Foods Inc. has showed major improvements as it has changed its portfolio over the past few years, which has led to a noticeable upturn in its sales, he said.
Shares of Kellogg ended Monday down 1 cent at $52.58. General Mills fell 10 cents to $68.00. ConAgra Foods rose 1 cent to $22.19.