3 Consumer Stocks That Investors Went Shopping For in May

Why did investors flock to The Hillshire Brands Company, Keurig Green Mountain, and Brown Shoe last month?

Jun 8, 2014 at 11:00AM
Keurig Brewer

Source: Keurig Green Mountain

May showers might have struck some companies' shares down last month, but others came out smelling like roses. The Hillshire Brands Company (NYSE:HSH) pursued an acquisition, then found itself in the middle of a bidding war.  Keurig Green Mountain Inc (NASDAQ:GMCR) announced a solid quarter and an increased stake from a newer partner. Also, Brown Shoe (NYSE:BWS) gave investors a reason to look toward the future. 

Why did these companies have double-digit percentage share price gains in May? 

Hillshire leaps on bidding war
Shares of Hillshire Brands were up 50% in May as Pilgrim's Pride and Tyson Foods placed bids for the company. The acceptance of a bid would halt an acquisition Hillshire pursued earlier in the month.

Working in chronological order, Hillshire offered a total of $6.6 billion, including debt, to purchase Pinnacle Foods -- the owner of multiple big-name brands such as Duncan Hines, Hungry Man, and Mrs. Butterworth's. Pinnacle would add more shelved grocery items to flush out Hillshire's own brands such as its namesake sausage products, Sara Lee frozen desserts, and Jimmy Dean and Ballpark meats.

However, the Pinnacle deal won't close if Hillshire decides to sell itself to the highest bidder. Fresh meat producer Pilgrim's Pride offered $45 per share while competitor Tyson countered with $50 per share. The companies both want Hillshire to diversify their own businesses further beyond the meat cases.  

Hillshire is currently considering its options but the share price spike indicates that investors expect a sale. 

Coca-Cola orders more Keurig 
Keurig Green Mountain had another strong quarter with shares up 20% thanks to the second-quarter report and The Coca-Cola Company increasing its stake in the company. 

The brewing company beat second-quarter estimates for both revenue and EPS at $1.1 billion and $1.08, respectively. Sales of portion packs, or K-cups, were up 13% year-over-year. Portion packs account for the majority of Keurig's revenue and the segment grew despite K-cups losing patent protection in late-2012.

Keurig has kept its portion pack sales going through exclusive partnerships with several large brands. However, the biggest deal to date came earlier this year, when Keurig and Coke signed an exclusive beverage deal geared toward the forthcoming Keurig Cold devices. The original deal gave Coke a 10% stake in Keurig Green Mountain, but Coke upped that amount in May to 16%.

Brown Shoe plans a good year 
The Brown Shoe Company reported first-quarter results at the end of May and closed out the month up 19%. Brown Shoe, which owns brands that include Famous Footwear and Buster Brown, reported mixed metrics but provided better-than-expected full-year guidance.

Brown Shoe missed analysts' revenue consensus of $593 million with a reported $591 million. However, the company beat the consensus EPS estimate of $0.31 by $0.04. The full-year guidance included revenue of between $2.58-$2.60 billion and EPS of $1.47-$1.57. Compare that to analysts' estimates of $2.5 billion and $1.41, respectively, and see why investors considered May a good month to buy Brown.

Foolish final thoughts 
Hillshire Brands' fate remains up in the air, but investors would benefit from either the company completing an acquisition or putting itself in that position. Keurig Green Mountain continues to rack up partnerships and the Keurig Cold device will likely attract even more brand names before launch. Also, Brown Shoe simply walked its way into a decent quarter, while suggesting a brighter year for investors. 

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Brandy Betz has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and Keurig Green Mountain. The Motley Fool has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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