3 Food Stocks Susquehanna Likes More Than Any Others

• Pablo Zuanic of Susquehanna stated that he has a "more neutral/negative" view of consumer staples.
• However, Zuanic initiated coverage of Mondelez International Inc (NASDAQ: MDLZ), WhiteWave Foods Co (NYSE: WWAV), and Treehouse Foods Inc. (NYSE: THS) with a "positive" view.
• The analyst is positive on the three companies "self-help" stories, attractive valuations, a North America slant, and "optionality."

Pablo Zuanic initiated coverage of food stocks with an overall "more neutral/negative" view as interest rates are set to rise (M&A activity will be more limited as funding costs rise), emerging market currencies are likely to further weaken, and momentum stories continue to "lose luster" in the space.

Zuanic prefers "self-help" stories and investors should seek companies with attractive valuations, a North American slant, and "optionality." As such, the analyst initiated coverage of Mondelez International, WhiteWave Foods, and Treehouse Foods with a "positive" rating.

Mondelez International: ‘Better Than Average' Franchise

Zuanic initiated coverage of Mondelez with a Positive rating and $60 price target.

According to Zuanic, Mondelez's stock is "attractively valued" and should deliver above-average earnings per share growth given its "better than average" global franchise in its core snacks business.

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Zuanic said shares are trading at an "unwarranted" 12 percent discount to the peer average (based on a tax adjusted and equity income adjusted EV/EBITDA). In addition, ongoing activist pressure will continue pressing management to deliver on profit margin targets.

WhiteWave Foods: ‘Riding Consumer Trends'

Zuanic initiated coverage of WhiteWave with a Positive rating and $53 price target.

Zuanic noted that WhiteWave offers investors a "well-advertised top line story," an attractive valuation (25 percent discount to Monster Beverage on properly adjusted multiples) and profit margin upside.

The analyst added that the company is "riding consumer trends" in the health and wellness category such as alternative milk drinks, organic milk, and organic salads. Meanwhile, core-categories have been expanded in the US, including desserts, organic creamers, powder shakes and yogurts.

Finally, Zuanic suggest that WhiteWave is a potential take-out target and investors should "make use of the recent pull back in the stock."

Treehouse Foods: Largest Private Label Supplier

Zuanic initiated coverage of Treehouse with a Positive rating and $108 price target.

Zuanic pointed out that Treehouse is still the largest private label supplier in the US despite recent contract losses and margin compression within the K-cup segment. In fact, the private label segment is seeing its demand outstrip branded food products.

Zuanic said Treehouse is refocusing its diversified portfolio to more growth-type categories including snacks and "better for you" rather than just focusing on the value end of the low growth parts of the market.

Finally, the company is in talks to acquire ConAgra's private label business – a transaction that would almost double the size of the company.

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