Hostess Brands (NASDAQ:TWNK) is listed as one of Evercore ISI’s Best SMID Core Idea.
Analyst David Palmer highlighted key factors in making the bull call such as TWNK’s attractive sweet baked goods segment growth of +3% driven by innovation and recovery in the convenience channels. The company’s highest margin business (single serve, convenience) is expected to benefit the most versus food peers in a post-COVID traffic recovery.
Palmer also thinks Hostess Brands management has been executing well with the Voortman’s cookie business integration, which could imply upside to the prior synergy targets.
In a valuation check, Hostess Brands (TWNK) is noted to be trading at ~10.5x EBITDA vs. the mid-cap food peer group average of 13X. On the balance sheet, the read on TWNK is that there is possible M&A upside, reasonable debt leverage, and plenty of buyback firepower.
Evercore ISI has an Outperform rating on TWNK and price target of $25.
The Seeking Alpha Quant Rating on Hostess Brands is flashing Strong Buy.