Key Takeaways
- ABF’s share price slump on Sept. 10 has wiped out this year’s entire gains for the stock.
- The food companies covered by Morningstar have underperformed the Morningstar UK Index.
- Associated British Foods, Unilever and Tate & Lyle are undervalued stocks, according to Morningstar.
Shares in UK-listed Associated British Foods ABF tumbled more than 12% on Sept. 10 as investors digested weaker-than-expected sales figures in the latest trading update.
After the slide, the shares closed at £19.40 on Wednesday, wiping out the gains for the entire year.
Among a wide range of investor concerns, they focused on the company’s bread division.
“The announced acquisition of Hovis, a UK breadmaker, raises questions as ABF attempts to shore up its loss-making Allied Bakeries. The UK bread market remains fiercely competitive, with pricing heavily influenced by supermarkets and further pressured by their in-house bakeries,” says Diana Radu, equity analyst at Morningstar.
But the selloff was not sector wide. Shares in Unilever ULVR, which owns brands such as Magnum and Bertolli, and sugar manufacturer Tate & Lyle, TATE were largely unchanged.
How are UK Food Stocks Performing in 2025?
Year to date, shares in ABF, Unilever, and Tate & Lyle have underperformed the near 16% rise in the Morningstar UK Index as rising inflation has increased input costs for food manufacturing companies. Tate & Lyle is the worst performer with a 20% loss so far in 2025.
The Morningstar Global Package Foods Index is up 8% in US dollar terms this year, but is down nearly 5% in euros and flat in pound sterling.
Are Associated British Foods, Tate & Lyle, and Unilever Shares a Buy, Sell, or Hold?
After this week’s moves and the trends of 2025, are any listed food companies now attractively valued?
Narrow-moat Tate & Lyle is the most undervalued UK food stock covered by Morningstar and is trading in 5-star territory. At 511p, its shares now trade significantly below its fair value estimate of 810p.
Morningstar’s Radu says that Tate & Lyle is well positioned to benefit as consumers demand healthier and safer sweetening products.
After the trading update from Associated British Foods, Radu kept the fair value estimate for the no-moat stock unchanged at £24.50.
“At current levels, we view the shares as undervalued. We believe the market may be overreacting to changes in the agriculture and bread businesses,” she says.
Wide-moat Unilever is also undervalued at current levels and is trading as a 4-star stock. At around £46, its shares trade at a discount to its fair value estimate of £49.40.
According to Diana Radu, equity analyst at Morningstar, Unilever has experienced good performance in developed markets, though there are clear signs of weakness in emerging markets.
