Sanford-Bernstein has downgraded its expectations for the European food sector for 2006 to ‘market-weight’, on the back of valuations and less positive operating dynamics.
Sanford Bernstein said the European food sector enjoyed a strong performance in 2005, with average growth of 24%. Nestlé was the top performer with growth of 32% and Associated British Foods the weakest with growth of 7%.
However, certain trends – such as top-line growth particularly in emerging markets, the outlook for food and packaging commodities, shares buybacks and positive forex factors – may no longer be as beneficial in 2006, the broker said.
However, Sanford Bernstein maintained its ‘outperform’ rating on Nestlé and Cadbury Schweppes, with a ‘market-perform’ rating for Unilever and an ‘under-perform’ rating for both Danone and Associated British Foods.