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Moody's: Outlook positive for U.S. packaged-foods industry
Moody's Investors Service said it revised its outlook for the U.S. packaged-foods industry to positive from stable.
The agency expects industry-wide sales to increase 3% to 4% over the next 12 to 18 months and operating income to increase 6% to 8%. In its previous forecast, Moody's had projected operating growth of 4% to 6%.
"Branded food makers will expand their gross margin as higher pricing prompted by the 2012 drought complements falling input prices," Brian Weddington, a Moody's vice president and senior credit officer, said in an agency news release.
"Cost cutting and plant closings will be key contributors to earnings growth."
Companies Moody's views as particularly well positioned for growth include General Mills, Inc. (A3/stable), Hershey Co. (A2/ review for upgrade) and Flowers Foods, Inc. (Baa2/stable). The agency expects these companies to post operating earnings growth that is near the top end of the 6% to 8% estimated range.
Companies that will face the challenge of coaxing growth out of their mature core businesses and paying down debt from bolt-on acquisitions include ConAgra Foods, Inc. (Baa2/negative), Campbell Soup Co. (A2/negative) and Kellogg Co. (Baa1/negative), Moody's said.
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