Investing.com -- Morgan Stanley has identified several promising opportunities in the US food sector, highlighting companies poised for growth despite varying market conditions.
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The investment bank’s analysis points to strong fundamentals and potential upside for select stocks in this defensive sector.
1. Hershey (NYSE:HSY)
Recently upgraded to Overweight by Morgan Stanley, Hershey is entering what analysts believe will be a multiyear earnings recovery. The chocolate giant is showing improving category and market share momentum, particularly across everyday and seasonal chocolate products.
A more favorable cost environment, including a 15% moderation in spot cocoa prices, provides increased visibility into above-consensus earnings potential for FY26/FY27. Analysts see a credible path to EPS outperformance, with mid-single-digit percentage upside versus consensus expectations.
In recent developments, The Hershey Company has received upgrades from several analyst firms, including an upgrade to Overweight from Piper Sandler, citing relief from cocoa costs. The company also amended its bylaws to clarify its board leadership and governance structure.
2. Mondelez International (NASDAQ:MDLZ)
Despite near-term organic sales growth uncertainty, Morgan Stanley views Mondelez as offering one of the strongest long-term growth outlooks in US Food. The company’s structural advantages support above-average long-term organic sales growth potential, while analysts also see above-average EPS flexibility in 2026.
With approximately 40% of its portfolio in emerging markets, which continue to deliver mid-single-digit growth, Mondelez remains relatively insulated from US-centric pressures. Additional upside potential comes from declining cocoa costs, FX tailwinds, and M&A possibilities given the company’s strong balance sheet. Notably, Mondelez’s NTM P/E currently trades at a 10% discount to its 5-year average.
Mondelez International had its price target lowered to $69 by JPMorgan, which cited concerns related to cocoa ahead of the company’s earnings report.
3. Vital Farms (NASDAQ:VITL)
As Morgan Stanley’s preferred small/mid-cap name in the food sector, Vital Farms continues to benefit from shifting consumer preferences toward protein, healthier choices, and specialty eggs.
Analysts view market concerns around competition and price gaps as overblown, pointing to continued momentum in household penetration and buy rates. The company continues to post the strongest buy and repeat rates among its competitive set, suggesting an outsized top-line growth opportunity that remains underappreciated by the market.
Vital Farms saw several analysts adjust their outlooks, with firms including TD Cowen and BMO Capital lowering their price targets following the company’s revised guidance.
4. BellRing Brands (NYSE:BRBR)
While maintaining an Overweight rating, Morgan Stanley acknowledges concerns about BellRing’s weaker-than-expected December scanner performance, which shows category growth deceleration and accelerating share losses. These losses appear concentrated in the club channel where competition has intensified.
However, analysts note December is a lighter seasonal period for the category and doesn’t yet reflect the full impact of BellRing’s new Walmart partnership. While the stock is down approximately 11% year-to-date, partially reflecting these concerns, Morgan Stanley has reduced its price target to $32 based on 11x CY27 EV/EBITDA.
BellRing Brands provided initial fiscal year 2026 guidance that fell short of expectations and reduced its long-term sales growth outlook. Additionally, Moody’s affirmed the company’s B1 corporate family rating but changed its outlook from positive to stable, citing an aggressive share repurchase strategy.
5. Smithfield Foods (NYSE:SFD)
This vertically integrated pork producer offers an attractive near-term setup according to Morgan Stanley, supported by expected fourth-quarter upside and a favorable commodity environment. Packaged meats are poised for margin expansion as raw material costs ease, while fresh pork and hog production benefit from supportive market conditions.
Analysts see a clear path to mid-single-digit EBITDA growth in FY26. At current levels, Smithfield trades at approximately a 23% discount to Tyson despite offering a higher EBITDA growth profile for FY26 relative to consensus expectations.
More recently, Smithfield Foods reported a significant increase in third-quarter profit, driven by strong sales and improved hog production. The company also announced an agreement to acquire Nathan’s Famous in an all-cash transaction.
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