Kimberly Clark, Conagra cut to Sell as DB eyes more difficult operating environment
jetcityimage/iStock Editorial via Getty Images

In a new assessment of consumer staples stocks, Deutsche Bank dimmed its view of Spectrum Brands (SPB), Kimberly Clark Corporation (NYSE:KMB), Flower Foods (FLO), and General Mills (GIS). 
The bankâs analystsâ bearish opinion shifts pertained to Flower Foods (FLO), Conagra Brands (NYSE:CAG), Kimberly-Clark (KMB). For the latter, the company is expected to be hit by consumer belt-tightening particularly hard.
âOn the one hand, given a combination of widening price gaps and generally deteriorating consumer financial health, we see KMB being exposed to elevated risks of share loss and/or increasing promotional intensity/competition that could significantly cut into expected margin upside in the near-to-medium term,â the analysis explained. 
The team of analysts at Deutsche Bank led by Steve Powers reduced their rating from Hold to Sell and assigned the stock a $123 price target. Both Conagra (CAG) and Flower Foods (FLO) were also cut to Sell alongside Kimberly Clark (KMB) due to the same pressures confronting consumers, causing a trade-down and hampering premiumization strategies at each firm.
âOverall, we believe FLO is managing its business wellâa view reinforced by recent meetings with management at the company's Oxford, PA manufacturing facilityâand we do see potential upside from CY23 innovation initiatives,â Powers acknowledged. âHowever, we also believe market conditions are likely to persist in a manner that challenges the company's premiumization strategy overall in the near-termâleading to below-consensus forecasts on our part over the next few years.â
For General Mills (GIS) and Spectrum Brands (SPB), which were both moved to Hold from Buy, valuation was the key issue at hand. 
âWhile we continue to believe GIS operates from a position of relative advantage (with improved execution, capital structure, and portfolio composition relative to years ago), we also see current market expectations well-aligned with this view,â Powers explained. âFor SPB, we see Assa Abloy's announced agreement late last week to sell Emtek and the Smart Residential business in the US and Canada to Fortune Brands as rebalancing risk/reward from here more neutrally â noting now more material downside if the HHI deal is further delayed or the DOJ prevails in court.â
The team highlighted Procter & Gamble (PG), Colgate-Palmolive (CL), Mondelez (MDLZ), Church & Dwight (CHD), and Kraft Heinz (KHC) as more attractive consumer staples picks. The latter in particular was cited as "the most underappreciated turnaround story" within their coverage universe.
Read more on the latest developments in Spectrum Brandsâ planned asset sales.