A number of food manufacturer shares slipped Monday after a Citi analyst lowered his rating on some of the biggest names in the sector.
Analyst David Driscoll said in a research note that after several years of optimism about U.S. food manufacturing, he has grown more cautious about the industry for 2015. He said the sector has reached a 15-year high in its price-to-earnings ratio, meanwhile sales volume has fallen and companies are facing a tough foreign exchange environment.
Driscoll does not expect sales volumes to improve, given economic challenges overseas and ongoing soft sales in the U.S. The big challenge for 2015 though, according to the analyst, is in foreign exchange. The strong U.S. dollar creates a tough currency translation issue for food manufacturers, particularly those that do a lot of business overseas.
In turn, the analyst lowered his rating on Mondelez International Inc., Kellogg Co. and ConAgra Foods Inc. to neutral from buy and dropped his rating on Campbell Soup Co., Kraft Foods Group Inc. and McCormick & Co. to sell from neutral.
Shares of Mondelez slipped 39 cents to $36.83, Kellogg shares fell 84 cents to $65.59 and ConAgra shares fell 59 cents to $35.66, outpacing a broader market dip. Campbell shares fell 6 cents to $45.34, Kraft shares fell 25 cents to $63.53 and McCormick shares dropped 83 cents to $73.80.