In “10 Things Americans Have Suddenly Stopped Buying”, Money Magazine describes ten products that are no longer popular with consumers and how the new trend is affecting the total sales of the companies producing these goods.
The ten out of favor products include: cereal, soda, gum, guns, cupcakes, Chef Boyardee canned pasta, golf gear, razors, bread and convertibles.
In this article, we will try to find out how this new trend affects the stocks of those that are producing out-of-favor goods and what the prospects of these companies are according to top analysts and bloggers.
Since we wanted to eliminate all biased opinions, we have taken into account only the latest recommendations from analysts and bloggers who have at least a four-star rating, according to TipRanks, a website that ranks experts (analysts and bloggers) according to their performance history.
The crash of soda—diet soda in particular—has been years in the making. Consumers have been increasingly turning to energy drinks, flavored water, and other beverages instead of the old carbonated caffeine drink of choice.
Coca-Cola (KO), the leading producer of soft drinks around the world, reported its second-quarter financial results on July 22. During its Q2 results, Coca-Cola reported International volume growth of 3%, while the company’s North American volume broke even; sales declined more than 1% to roughly $12.6 billion.
Only five top analysts are currently covering Coca-Cola’s stock. Three top analysts recommended to BUY the soda giant, while two top analysts have a HOLD rating on the stock. Top bloggers are also bullish on Coca-Cola with seven out of eight that have published analysis on the company in the last two months. One top blogger rated it as a Sell.
Goldman Sachs’ analyst Judy Hong maintained a Neutral rating on Coca-Cola with a price target of $43, following its Q2 results. “We expect relatively muted stock reaction. Volume and price growth was generally in line with expectations,” said Hong. “KO reported 2Q14 EPS of $0.64 versus our estimate of $0.63. Global unit case volume growth improved to 3%, as expected and global price mix of 2% was in line with our expectation, implying 5% underlying revenue growth. A lower than expected tax rate drove a penny beat versus our estimate.”
According to TipRanks, Hong has a +12.0% average return on all stocks and a 76% success rate in making recommendations.
On the other hand, on July 29, five-star blogger Todd Johnson recommended to BUY Coca-Cola stock saying, “I just don’t see Coca-Cola and its vast stable of beverages (Coke, Sprite, Minute Maid, PowerAde, Glaceau, etc.) dropping off in popularity and sales anytime soon.”
Johnson has a +9.7% average return on all stocks and a 70% success rate in making recommendations.
Beard-loving hipsters were part of the blame for the decline in razor sales last summer, according to Money Magazine. In 2014, companies like Procter and Gamble (PG), the parent company of razor giant Gillette, has continuously blamed poor sales on the trendiness of beards.
Procter and Gamble’s chief financial officer, Jon Moeller, acknowledged that hipsters were partially to blame, claiming America’s love affair with facial hair — particularly, the trend of growing mustaches in November known as “Movember” — is hurting sales of the company’s razors.
Five top analysts are currently covering Procter & Gamble. Two of the analysts recommend the stock, while three analysts have Hold ratings. Top bloggers are more bullish on the company; in fact, all five top bloggers that have published analysis on PG’s stock in the last two months recommended to BUY.
On July 11, Wells Fargo’s analyst Christopher Ferrara downgraded Procter & Gamble from Outperform to Market Perform with a price target of $85-$87 (from $88-$90). Mr. Ferrara noted expectations were low, but he sees no signs of progress and thinks share gains are less likely.
According to TipRanks, Ferrara has a +15.8% average return on all stocks and a 67% success rate in making recommendations.
Separately, on August 6, a blogger named Dividend Growth Investor recommended PG stock saying, “Procter & Gamble is a dividend king which has managed to increase dividends for 58 years in a row. It is the quintessential wide moat company with strong brand recognition. The stock is attractive at 17.70 forward earnings and a yield of 3.20%. This is the type of company I expect to hold forever.”
Dividend Growth Investor has a +18.0% average return on all stocks and a 86% success rate in making recommendations.
According to Money Magazine, in one recent four-week period, cereal sales were down 7% and cereal giant Kellogg’s (K) sales decreased 10%. The reasons for cereal’s declining dominance at the breakfast table are many. As the Wall Street Journal reported, consumers are more apt nowadays to turn to yogurt or fast food in the morning and they’re less likely to have time to eat breakfast at home at all—not even a simple bowl of cereal.
Two top analysts are currently covering Kellogg, both having issued a Hold rating on the stock. On the other hand, four top bloggers have published analysis on Kellogg’s in the last two months, three of which gave the company a Sell rating, and one who rated it as a Buy.
On May 29, Seeking Alpha’s top blogger Jeroen Jongbloed wrote of Kellogg’s: “All things considered, I think now is not the time to purchase shares in Kellogg. It’s a great company with an extremely long dividend history, but it’s more expensive than it should be and the dividend yield is quite low at the moment. Furthermore, Kellogg’s balance sheet doesn’t make me feel entirely comfortable. However, if at some point in time there is a large drop in Kellogg’s share price; I may buy a few shares to profit from the ever-growing dividends.” Jongbloed has a +8.9% average return on all stocks and a 67% success rate in making recommendations.
Separately, Deutsche Bank’s four-star analyst Eric Katzman maintained a Hold rating on Kellogg with a price target raised to $66 from a previous $64. Katzman has a +7.9% average return on all stocks and a 60% success rate in making recommendations.
Due to heightened competition from mints and candies, chewing gum sales have dipped 11% over the past four years. The editorial board of the News Tribune of Washington state weighed in, saying it is wonderful that gum sales are down in the gutter. He reasoned, “Gum-chewing doesn’t do us any favors, making us look like cows chewing our cud. For humans, that’s not a good look.”
On July 24, The Hershey Company (HSY), the manufacturer of Bubble Yum, reported its second-quarter financial results which were in-line with expectations.
Two top analysts have covered Hershey within the last three months with one HOLD rating and one SELL rating. On the other hand, there are four top bloggers covering Hershey as well, but all have issued a unanimous BUY rating within this last month.
On May 16 of this year, Goldman Sachs analyst Lindsay Mann issued a SELL for Hershey reasoning, “Over the next 5 years, as their spending power increases, [millennials] are expected to transition from the smallest cohort in their contribution to consumer staples and discretionary spending, to the largest, with average annual spending growth of 3%-4%, while baby boomer spending shrinks at a -2% pace.”
Mann has a +9.4% average return on all stocks and a 61% success rate in making recommendations.
Separately, on July 28, 4.5-star blogger Alexander J. Poulos recommended Hershey’s stock saying, “The Hershey Company offers the best value in the food processing industry. Hershey is a truly special company due to the consistent high returns they generate. The patient long term investor may have an opportunity here as the spike in cocoa and dairy prices have curbed Wall Street’s enthusiasm for the shares.”
Poulos has a +14.5% average return on all stocks and a 73% success rate in making recommendations.
As of recent, it looks like much of the general population has stopped buying the pricey “gourmet” variety of cupcakes. That’s the conclusion that was drawn with the collapse of Crumbs, the 65-store cupcake chain that shut down abruptly in early July. The news was widely interpreted as a sign that the gourmet cupcake trend is officially dead.
Days after putting in a bid to rescue Crumbs Bake Shop (CRMB) out of bankruptcy, investor Marcus Lemonis lambasted the very product he planned to save, according to the Wall Street Journal. “The key to the baking business is the actual manufacturing process,” Mr. Lemonis said in a CNBC interview July 14, adding that he is “one of those critics” who says the cupcakes don’t taste that great.
Crumbs Bake Shop is trading now on the OTC at about $0.27, and not one analyst is currently covering the company.
ConAgra Foods, Inc. (CAG) recently issued a warning to Wall Street that its consumer food volume experienced a 7% decline, and that it is facing “continued profit challenges” due to some of its flagging, tired products—in particular, Chef Boyardee, the 86-year-old canned pasta brand.
On June 10, Chef Boyardee, a brand of ConAgra Foods, announced the return of easy-to-open “pop top” lids on all its canned pasta dishes in an effort to win back the business from loyal fans. In the spring of 2013, Chef Boyardee phased out pop top lids on its canned pastas, underestimating their popularity among consumers. With many Chef Boyardee enthusiasts clamoring for their return, the decision was made earlier this year to reinstate pop top lids.
Three top analysts have given recommendations for ConAgra foods within the past two months, with one BUY, one HOLD, and one SELL. Five top bloggers have also issued analysis of the food distributor with three BUYS and two SELLS.
On June 19, Merrill Lynch’s four-star analyst Bryan Spillane downgraded ConAgra Foods to Underperform from Buy with a $30 price target. Spillane has a +14.4% average return on all stocks and a 65% success rate in making recommendations.
Meanwhile, Citigroup’s four-star analyst David Driscoll maintained a Buy rating on ConAgra Foods with a price target lowered to $35 from a previous $36.Driscoll has a +10.0% average return on all stocks and an 81% success rate in making recommendations.
The Money Magazine published a survey saying that 56% of American shoppers said they are cutting back on white bread. White bread was surpassed in sales by wheat bread sometime around 2006, but in recent years the gluten-free trend has hurt sales of all breads.
However, Flowers Foods (FLO) – the maker of the widely known Wonder Bread- was recently labeled as “oversold,” making the company extremely attractive to investors who are looking to BUY.
One top analyst and one top blogger both issued BUY ratings for Flower Foods within the past three months.
On June 2, Deutsche Bank analyst Eric Katzman issued a BUY rating for Flowers foods with a $26 price target.
Katzman has a +7.9% average return on all stocks and a 60% success rate in making recommendations.
Similarly, on May 23 a blogger who goes by Dividends4Life labeled Flowers Foods as becoming more valuable with its increased cash dividends.
Dividends4Life has a +7.2% average return on all stocks and a 70% success rate in making recommendations.
Gun sales have sharply fallen as of lately. The big reasons why seems to be that there’s little in the way of likely gun control for gun enthusiasts to motivate new purchases, as well as everyone who has wanted to buy a gun in the past couple of years has already bought one.
On June 19, Smith & Wesson (SWHC) reported its latest quarter financial results, which were better than analysts’ expectations. However, net sales for the fourth quarter were $170.4 million, a decline of 4.6% from the fourth quarter last year.
In the last two months, three top analysts issued a BUY rating for Smith & Wesson. In the past three months, two top bloggers gave their opinions on the company as well, with one BUY and one SELL.
In a research note issued on June12, Wedbush’s four-star analyst Rommel Dionisio reiterated coverage with a “Buy” rating on Smith & Wesson, and a price target of $20.00 a share. According to Mr. Dionisio, shares of SWHC have generally traded in line with its peer group at 6x-9x EBITDA, not at a 20-30% relative discount the stock has seen the past 1 ½ years during the demand boom/bust cycle. Should the firearms industry soon normalize as he expects, shares of SWHC will similarly return to its historical norm of trading in line with the peer average. He noted, “With difficult industry comps now largely behind the company and with market share gains for S&W throughout the downturn, we expect solid Q4 results.”
Dionisio has a +9.0% average return on all stocks and a 47% success rate in making recommendations.
Separately on May 6, Motley Fool blogger Rich Duprey was not so optimistic about Smith & Wesson. He reasoned, “Because it’s largely not needed and it represents a slippery slope for registration, tracking, and restriction, gun owners will withhold support from those who try to introduce it, making it unwise to try to force it on them.”
Duprey has a +6.4% average return on all stocks and a 57% success rate in making recommendations.
It’s not surprising that with fewer people playing golf, there are also fewer golf purchases being rung up at sporting goods stores. The most notable eye-opener occurred this past spring, when Dick’s Sporting Goods (DKS) announced that its golf equipment sales were down around 10%. At the same time the average driver was selling at a price of 16% less.
Nine top analysts have rated Dick’s Sporting Goods within the last three months, four of whom have issued a HOLD rating and 5 who have issued a BUY rating. Only one top blogger has issued analysis of Dick’s Sporting Goods as of recent with a BUY.
On May 16, Goldman Sachs‘ four-star analyst Lindsay Mann, recommended DKS stock, describing the athletic superstore stock as “a value play” that will benefit from its large e-commerce business, the analysts wrote, Dick’s “is well-positioned to benefit from greater participation in wellness-related activities and associated strength in sales of athletic apparel and footwear, underscored by strategic vendor partnerships and large and growing ‘shop-in-shop’ footprints.”
Mann has a +9.4% average return on all stocks and a 61% success rate in making recommendations.
Convertible sales have fallen 44% since 2004, and automakers have been significantly scaling back the number of models that are even offered in convertible form, according to Businessweek. Apparently, too many consumers see convertibles as impractical, and/or not worth the $5,000 or so premium one must pay compared to the regular model. The fading allure of convertibles has prompted carmakers to drop many open-air models. Even Toyota Motor (TM), the world’s top-selling automaker, has only one current convertible, a Lexus.
Four-star blogger Sarfaraz A. Khan, the only top blogger to make a recommendation about Toyota in the last four months, issued a BUY rating for the company, saying that the company is sitting atop a massive pile of cash which is bigger than Tesla’s market cap, and it is eyeing record levels of profits and sales.
Khan has a +9.4% average return on all stocks and a 64% success rate in making recommendations.
No top analysts have made any recommendations on Toyota as of recently.
It’s clear that some of these companies are being largely affected by the sudden disinterest in their products; however others have proven strong enough to push through this ‘bump in the road’ and are worth investing in, at least according to top financial experts.