Seeking Alpha: The Pepsi Launch Approaches, But Senomyx Needs To Deliver On Its Own Sales Efforts

The wait drags on for Senomyx (NASDAQ:SNMX), testing the patience of shareholders ahead of a long-anticipated launch from its major partner PepsiCo (NYSE:PEP). Chemophobia-laced "healthy living" nonsense aside, the fact remains that additives remain integral to the packaged food and beverage industries and a large revenue opportunity for Senomyx in the coming years.

The key question remains as to whether Senomyx can convert that large opportunity to real sales. Although the company's direct sales efforts have long lead times (up to, or beyond, two years in some cases), some fruits of those efforts should be visible in the next twelve months. Likewise, investors will know soon enough whether PepsiCo is going to launch products incorporating Senomyx's Sweetmyx S617 with its full marketing vigor or whether it will be a more cautious and limited effort. Delays in commercialization efforts and increased execution risk in my model have led to a lower fair value, but that fair value target remains close to $10 and offers substantial upside if those orders do in fact materialize.

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The Pepsi Launch Approaches, But Senomyx Needs To Deliver On Its Own Sales Efforts

Seeking Alpha: BRF SA Doing A Lot More With Less

Brazil's leading food producer, BRF SA (NYSE:BRFS) (also known as Brasil Foods), tends to be quite a bit more volatile than international peers like Nestle (OTCPK:NSRGY) and Unilever (NYSE:UL) or U.S.-centric companies like Hormel (NYSE:HRL). In the last quarter that volatility has worked in investors' favor, with a better than 13% gain that brought the year-to-date gain up above 20%.

What should be of more interest to long-term investors is the significant progress the company is making with its plans to streamline its operations and prioritize margins over volume. I don't expect BRF to continue delivering 10% beats at the EBITDA line, but the company's strong execution with this plan certainly helps management build credibility. These shares aren't exceptionally cheap right now, but I'm in no hurry to sell what I believe is one of the better-run Brazilian companies and one with significant growth potential for the long term.

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BRF SA Doing A Lot More With Less

The Motley Fool: Why Valeant's Offer Is Unlikely to Move the Needle

In the real world, if you ask a person out and they not only tell you "no" but then proceed to offer a multipage summary of all of your failings (at least in their eyes) and why they would be better off alone than with you, it's usually safe to say that it is time to move on. While corporate finance is part of the real world (allowing for liberal definitions of "real"), it certainly doesn't take the same view on rejection – while Allergan (NYSE: AGN  ) has, in so many words, told Valeant (NYSE: VRX  ) to drop dead and take its unsolicited offer with it, Valeant remains undeterred and has come back with yet another offer.

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Why Valeant's Offer Is Unlikely to Move the Needle

Seeking Alpha: McCormick Spanks The Skeptics, But Not Exactly A Bargain

Spice, seasoning, and packaged food giant McCormick (MKC) has long enjoyed a privileged position in the food sector, as investors have been willing to pay a premium for shares in a company that holds uncommonly high market share and ups its dividend like clockwork. The shares were caught in the downdraft that saw other food stocks trailing the S&P 500 after mid-2013, but took an even steeper move down when management handed out weak 2014 guidance at the end of January.

Analysts suddenly started worrying about valuation on stock where valuation really hadn't mattered before, but then first quarter earnings came in higher than expected and sent the shares up more than 5%. McCormick is still expensive, but bulls can build a credible argument that the company's consistent double-digit ROICs and dividend hikes merit a much lower discount rate and that the shares are still a worthwhile holding for long-term investors.

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McCormick Spanks The Skeptics, But Not Exactly A Bargain

The Motley Fool: BRF SA Holds Impressive Long-Term Potential

Analysts and investors like to talk about "the next Apple" or "the next Microsoft," but they don't often talk about "the next Nestle (NASDAQOTH: NSRGY  ) ". That's a shame, as Brazil's BRF (NYSE: BRFS  ) , or Brasil Foods, has set that goal for itself; it has a long-term target of becoming a global packaged-foods leader with a particular focus on emerging markets. The path between here and there is not going to be smooth and setback-free, but BRF looks like a somewhat beaten-down name to consider in the emerging markets.

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BRF SA Holds Impressive Long-Term Potential

Seeking Alpha: For Pinnacle Foods, Slowly Does It

If you're looking for a dynamic revenue growth story, you probably want to look somewhere other than at Pinnacle Foods (PF). Pinnacle's management is realistic, looking for growth in line with the industry categories and focusing instead on optimizing cost and operating leverage. With several other brands and food businesses likely up for sale and opportunities for additional gross margin improvements, Pinnacle Foods still offers some respectable upside for patient investors.

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For Pinnacle Foods, Slowly Does It

Seeking Alpha: Medifast May Be The Best House On A Scary Street

In principle, weight loss should be an incredible honey pot for pharmaceutical, packaged food, and consumer service companies. In reality, it has proven considerably more difficult for anybody to make consistently good money in the space. Sometimes the problems are largely self-inflicted (Weight Watchers (WTW) certainly comes to mind here), and sometimes the issue is more related to consumer patience/discipline.

Whatever the case, investors trying to profit from the weight loss theme through publicly-traded stocks have faced a treacherous environment. Nutrisystem (NTRI) has been strong this year, but the five-year returns of stocks like Weight Watchers, Nutrisystem, Arena Pharmaceuticals (ARNA), and Vivus (VVUS) haven't been that great relative to the S&P 500.

That brings me to Medifast (MED). Medifast has been quite strong relative to this group of weight loss-centric stocks (and the S&P 500 as well) over the past five years, though the last year hasn't been nearly so good. Although the company's weight control center strategy hasn't worked out so well, the relationship-driven "Take Shape For Life" has, and the company has generated some solid free cash flow of late. Although I have my concerns with the business model and the concept, the valuation doesn't seem demanding to me and this may be the best house on a very scary street.

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Medifast May Be The Best House On A Scary Street

Investopedia: Campbell Soup Doesn't Seem To Be Prioritizing The Right Things

It's hard to run too hot or cold on Campbell Soup (NYSE:CPB). It has typically been a pretty conservatively-run company and many of its brands are virtually iconic. That said, management has been making some unusual decisions of late – promotional spend has seemed erratic, the company does not appear to be supporting Pepperidge Farms enough, and acquisitions of organic baby food and retail carrots are head-scratchers. Campbell Soup isn't unusual in being a somewhat expensive-looking packaged food stock, but this isn't a stock I'd pay up to own.

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Investopedia: Weaker Organic Growth Creating An Opportunity In Nestle

Swiss food giant Nestle (Nasdaq:NSRGY) is a remarkable company in several respects. Despite being one of the largest food companies in the world, Nestle continues to focus on ongoing product innovation and is closing in on generating half of its sales from emerging markets. Add 20 billion-dollar brands and a long track record of out-earning its cost of capital, and it's not too hard to see why Nestle shares often trade at a premium.

“Often” is not the same as always, though, and a recent slowdown in organic sales growth seems to have created a window of opportunity in these shares. Investors have to accept the risk that the company will fail to deliver 5% organic growth for 2013, but the long-term opportunity makes this a name worth considering.

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Investopedia: Wall Street All In On Kraft's Improvement Potential

The way many sell-side analysts talk about Kraft Foods (Nasdaq:KRFT) and the company's CEO Tony Vernon, you would think they make sure to never go to bed at night before kissing a picture of them both and writing their names with little hearts substituting for the “o's”. And this is for a company whose organic growth just hasn't been that good since the split with Mondelez (Nasdaq:MDLZ).

Now, to be fair, I do think Kraft is a good business and a very well-run company. In more than a few cases, Kraft either dominates its category or frankly is the category. Moreover, I like the motivational approach the company takes toward incentivizing employees, the company's focus on innovation, and its willingness to shift resources away from brands that can't carry their own luggage. On the other hand, while I do share Wall Street's optimism that Kraft will eventually post margins and free cash flow that are just as good as, if not leading, its peers, the valuation already assumes precisely that.

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Investopedia: BRF SA Serves Up A Feast For Investors

For reasons completely unknown to me, Investopedia editors chose to change the company name to "BRF SA" instead of Brasil Foods... 

The argument I've made for some time with BRF S.A. (Nasdaq: BRFS) is that this company is on a long-term plan to transform itself from a commodity- and export-driven protein company into a global branded food company like Kraft (Nasdaq:KRFT) or Nestle (Nasdaq:NSRGY). With that, I not only expect significant growth, but significant margin and free cash flow expansion over the next decade. BRF S.A. is by no means cheap according to conventional metrics, but the shares are still slightly undervalued on a cash flow basis and offer investors good exposure to emerging market consumer spending growth.

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Investopedia: Abbott Labs Making Progress On Margins, Now It Needs More Growth

Since making the split from AbbVie (Nasdaq:ABBV), Abbott Labs (NYSE:ABT) has had something of a mixed debut. The stock has not only lagged AbbVie to a meaningful degree this year, but also other med-tech stocks like Medtronic (NYSE:MDT) and Johnson & Johnson (NYSE:JNJ). While some of this can be tied to concerns about the infant nutrition business, the fact remains that the new Abbott isn't as high-growth or high-margin as some investors want to believe, and management has their work cut out to improve performance. I do like the company's recent M&A moves to bulk up the device business, but this doesn't look like a particularly cheap stock today.

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Investopedia: General Mills Getting Back To Normal

Maybe the markets are getting a bit more rational when it comes to packaged food companies. With many of these stocks up 20% or more over the past year, the last couple of months has seen the momentum fade a bit. Arguably that's a good thing for stocks like General Mills (NYSE:GIS) where the company's self-improvement efforts are likely to be more of the slow-and-steady variety. Although General Mills is back below fair value and arguably a decent long-term hold, it's not likely to deliver another “Market-plus-10%” sort of performance over the next twelve months.

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Investopedia: Annie's Still A High Growth-High Multiple Proposition

The hot packaged food market has cooled a bit recently, but Annie's (NYSE:BNNY) continues to sport a rich multiple as a relatively rare high-quality play on consumer demand for natural and organic food. Annie's isn't just a healthy living play, though, as the company is still relatively young and can look forward to years of product introductions and further distribution leverage. I recognize that growth investors tend to emphasize opportunities more than multiples, but more value-conscious investors may not find Annie's so appealing today.

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Investopedia: Better Margins Are Nice, But Are Green Mountain Investors Too Excited About The Starbucks Deal?

For better or worse, Green Mountain Coffee Roasters (Nasdaq:GMCR) is never a boring stock to watch. Caught in a tug-of-war between bulls and bears (the stock is up more than 100% over the past year, but over one third of the float is shorted), earnings reports always get more than their fair share of attention. This time around, the company made some respectable progress on margins, but investors may be getting a little too excited about the long-term implications of a new Starbucks (Nasdaq:SBUX) deal and a little too casual about unimpressive revenue growth trends.

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Investopedia: Mondelez Isn't As Good As Nestle, But Priced Like It Is

While I realize that Wall Street typically prices stocks on the basis of what investors believe a company will look like in the future, I'm still surprised by the relative valuations that come out of the process. Take the case of Mondelez (Nasdaq:MDLZ). This company is focused on multiple growth areas in the packaged food space (and has a large developing market exposure) and does indeed post better growth than many of its peers, but the overall combination of growth and margins wouldn't normally seem to argue for valuation on par with Kellogg (NYSE:K) or Nestle (Nasdaq:NSRGY). Consequently, although I do expect Mondelez to do well relative to its sector in terms of reported growth, I continue to believe that valuation is already too steep.

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Investopedia: Starbucks' Special Model Is Valuable, But Maybe Not This Valuable

Normally talking about “liquid meals” is something reserved for college students, but the reality is that Starbucks (Nasdaq:SBUX) has long since proven that there's room in the quick service restaurant (QSR) for something other than burgers and sandwiches. Starbucks has likewise capitalized on the brand value it built through its stores by establishing a significant retail/commercial presence that few restaurants come close to matching.

I don't want to make the mistake of underestimating what Starbucks can become. There's still ample room for store expansion in much of the world, not to mention additional products in the retail channel and follow-on markets like teas and pastries.

The only question I have is what this is all worth. On one hand, Starbucks doesn't seem priced all that out of line with successful QSR operators like McDonald's (NYSE:MCD), Chipotle (NYSE:CMG), or Dunkin' (Nasdaq:DNKN), nor successful packaged food and beverage companies like Coca-Cola (NYSE:KO), Mondelez (Nasdaq:MDLZ), and Nestle (OTC:NSRGY). On the other hand, investors have to either expect strong high-teens free cash flow (FCF) growth for at least another decade or accept relatively unimpressive expected annual returns for today's valuation to make a lot of sense.

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Investopedia: Investors Can't Seem To Get Enough Of Hershey

I have to give credit where it's due – Hershey (NYSE:HSY) is definitely one of the strongest stories in packaged/branded food today. While there are a few relative newcomers showing better volume growth (from a much smaller base), Hershey continues to lead the way when it comes to the large U.S. companies. Better still, Hershey is mixing that growth with strong margin leverage and making a pretty pleasing combo. Although I still think these shares carry a premium valuation, it's hard to argue with a story where management is making so many of the right moves.

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Investopedia: McCormick Continues To Defy Gravity

When I last wrote on McCormick (NYSE:MKC) in October of 2012, I liked almost everything about the company except the valuation on the stock. However, as I've mentioned repeatedly in the past, valuation is no impediment to further appreciation in the short term and McCormick shares have climbed a further 15% from that point (beating the market by more than 7% over that time).

Accordingly, the story on McCormick largely remains the same. While some investors will argue that the valuation of Berkshire Hathaway's (NYSE:BRK.A) and 3G Capital's deal for Heinz (NYSE:HNZ) “proves” that packaged food stocks are undervalued, I don't share that sentiment. The strong volume growth at McCormick is certainly positive, and I like both the company's commanding U.S. share and growth prospects, but today's share price suggests future appreciation potential more suited to bonds than an equity.

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Seeking Alpha: Brasil Foods Moving From Tyson Towards Nestle

Lack of ambition has never been a problem at Brasil Foods (BRFS). While over a third of the company's revenue currently comes from commodity meat exports to the Mideast, Africa, and Asia, Brasil Foods has made it abundantly clear that they don't see other Brazilian protein companies like Marfrig or JBS as their true long-term peers, nor American protein companies like Tyson (TSN) or Smithfield (SFD). No, Brasil Foods is playing for larger stakes - looking to become the developing world's answer to Nestle (NSRGY.PK), and they may just be ambitious enough to pull it off.

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Brasil Foods Moving From Tyson Towards Nestle