Morgan Stanley has spotlighted key players within the US food industry, emphasizing firms that exhibit robust underlying fundamentals and prospective growth, even as market conditions remain mixed. This defensive sector continues to attract investor interest due to its resilience.
1. Hershey (NYSE: HSY)
Recently, Morgan Stanley upgraded Hershey's rating to Overweight, forecasting a multiyear recovery in earnings. The chocolate manufacturer demonstrates positive trends in both market share and category performance, especially in its day-to-day and seasonal chocolate segments. A significant factor contributing to Hershey's improved outlook includes a roughly 15% reduction in spot cocoa prices, which enhances earnings visibility for fiscal years 2026 and 2027 beyond consensus forecasts. Analysts project potential mid-single-digit gains in earnings per share compared to expectations.
Complementing these financial indicators, Hershey has received positive reassessments from multiple analyst firms. Piper Sandler advanced Hershey's rating due to improved cocoa cost conditions, while the firm also updated its bylaws to reinforce clarity around board leadership and governance.
2. Mondelez International (NASDAQ: MDLZ)
While near-term organic sales growth remains uncertain, Monetdez International is viewed by Morgan Stanley as having one of the most promising long-term growth trajectories in the US food space. Structural advantages should facilitate above-average organic sales growth and grant the company greater earnings flexibility in 2026. Approximately 40% of Mondelez's portfolio is positioned in emerging markets, which continue to register mid-single-digit growth rates, thereby insulating the company from US-specific economic pressures. Additional growth drivers include reduced cocoa costs, foreign exchange benefits, and potential mergers and acquisitions supported by a strong balance sheet. It is worth noting that the firm's near-term price-to-earnings ratio trades at a 10% discount relative to its five-year average. JPMorgan recently lowered Mondelez’s price target to $69 due to cocoa-related concerns before its earnings announcement.
3. Vital Farms (NASDAQ: VITL)
Morgan Stanley's favored small to mid-cap stock within the sector, Vital Farms, benefits from shifting consumer preferences toward protein-rich and health-oriented food options such as specialty eggs. Analysts argue that market concerns regarding competition and pricing disparities are overstated, citing the company's sustained momentum in household penetration and purchase frequency. Vital Farms leads its competitive set in both repeat and new customer rates, implying a substantial top-line growth opportunity that remains underrecognized. However, firms like TD Cowen and BMO Capital have recently adjusted their price targets downward after Vital Farms revised its guidance.
4. BellRing Brands (NYSE: BRBR)
Maintaining an Overweight recommendation, Morgan Stanley acknowledges that BellRing Brands experienced weaker than anticipated scanner sales in December, reflecting slowing category growth and accelerating losses of market share. These reductions were mostly isolated to the club channel, where competitive pressures intensified. Analysts emphasize that December represents a lighter seasonal month and does not yet reflect the benefits anticipated from BellRing's new partnership with Walmart. Despite an 11% decline in stock price year-to-date, analysts have lowered the price target to $32, reflecting an 11x enterprise value to EBITDA ratio for calendar year 2027. BellRing also issued preliminary fiscal year 2026 guidance below expectations and trimmed its long-term sales growth forecast. Moody’s affirmed the company’s B1 corporate rating but revised its outlook from positive to stable, partly due to an aggressive share buyback strategy.
5. Smithfield Foods (NYSE: SFD)
Smithfield Foods, a vertically integrated pork producer, offers a near-term favorable investment case backed by anticipated fourth-quarter performance gains and a supportive commodity cost environment. Margins in packaged meats are expected to improve as raw material costs moderate, while fresh pork and hog production benefit from favorable market dynamics. Morgan Stanley projects mid-single-digit EBITDA growth for fiscal year 2026. Despite this growth outlook, Smithfield trades at about a 23% discount compared to Tyson Foods, even though it predicts higher EBITDA growth relative to consensus. The company recently reported a significant rise in third-quarter profit driven by strong sales and enhanced hog production. Moreover, Smithfield announced its acquisition of Nathan’s Famous in an all-cash deal.
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