September 3, 2020 , 10:52 am

Remote Schooling proved Good for Food Packaging Stocks

The back-to-school season has many students right back where they ended the last academic year—at home. And analysts say that could be good news for packaged-food stocks.

Evercore ISI’s David Palmer took a look at food sales in August, noting that they remained strong throughout the month and accelerated in the past two weeks. “Since some students have already started their fall semesters, we wonder if the last week’s improvement could be the early signs of a very different back-to-school season,” he wrote.

Breakfast is one meal to watch. About two-thirds of students in the U.S. will have some kind of remote-learning this fall, and when families don’t need to rush out the door, there is likely more time for an at-home meal to start the day.

More free time in the summer allowed consumers to return to Starbucks (SBUX) and Dunkin’ Brands (DNKN), and those chains reported some recovery in traffic from spring lows. That could change once schools are in session again.

Cereal sales, which had been languishing, were up 6% last week. “The breakfast and meal oriented companies seemed be the ones that experienced some acceleration lately—including Conagra (CAG), General Mills (GIS), and Kellogg (K),” Palmer wrote.

Piper Jaffray analyst Michael Lavery is seeing similar trends, showing that the at-home food trend has legs. “Retail sales for meal-oriented food companies are still growing at a double-digit pace, over five months past initial stockpiling.”

He also noted growth momentum ticking up for the category in recent weeks, and he believes that sales will remain elevated through the back half of 2020, with the threat of Covid-19 creating a tailwind for the group that could last into 2021.

Moreover, some two-thirds of consumers he surveyed said they planned to cook an average of four or more meals a week even after the pandemic ends, with more than half unsure whether they will return to reopened restaurants. “This would suggest a potential sustainable lift of 15% or more, though what level is truly sustainable is not yet clear,” Lavery noted.

Excluding Beyond Meat (BYND), which was already seeing triple-digit sales gains prepandemic, he noted that B&G Foods (BGS) and Tyson Foods (TSN) saw the biggest gains last week among the companies he tracks.

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