📉 Resilient Trader Trade Idea: The Commodity Cost Short on Marzetti Company (MZTI)

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Resilient Trader is where smart traders come for vetted ideas.

Every week, we cut through the noise to surface opportunities that institutions are already eyeing, with strategies tailored for retail traders. Today’s setup? A consumer staples stock that already fell hard, but still looks ready for another leg lower.

We’ll cover:

• Why The Marzetti Company (MZTI) is a short at current levels

• How to take advantage of defined risk through a long put

🔍 Trade Thesis: MZTI Has a Soybean Oil Problem That Hasn’t Hit Yet

The Marzetti Company (MZTI), formerly Lancaster Colony, makes dressings, sauces, dips, frozen breads, and licensed products tied to brands like Olive Garden, Chick-fil-A, Buffalo Wild Wings, Arby’s, Subway, and Texas Roadhouse.

This is not a junk company. It has real brands, real cash flow, and a long dividend history. But good companies can still become bad stocks.

Here’s the setup:

🚨 Retail sales are weakening: Retail sales fell 3.2% last quarter, and retail volume fell 5.6%.

📉 Earnings missed: The company reported adjusted EPS of $1.43, versus the $1.57 consensus estimate, per the trade setup we reviewed.

🧾 Sales are decelerating: Consolidated sales declined 1.0%, while adjusted sales declined 0.9%.

🛢️ Soybean oil could be the next hit: China announced a commitment to buy at least $17 billion in U.S. agricultural products annually, with soybeans as the key commodity, and reports point to roughly 25 million metric tons of annual soybean commitments.

That matters because soybean oil is a key input for sauces and dressings. Soybean meal also feeds livestock, which can push food costs higher across the system.

The punchline: soybean oil cost pressure has not yet fully hit MZTI’s P&L. We think it is coming.

📊 The Fundamentals Are Breaking Down

Let's break it down:

💰 Revenue: Q3 net sales were $453.4 million, down 1.0% year over year.

📉 Adjusted Sales: Adjusted net sales fell 0.9% to $451.8 million.

🛒 Retail Weakness: Retail sales dropped 3.2% to $233.8 million.

📦 Volume Problem: Retail volume fell 5.6%, which tells us this is not just a pricing issue.

🧮 Margins: Gross margin expanded by 50 basis points to 23.6%, but that improvement may be backward-looking if soybean oil inflation starts to flow through to cost of goods sold.

💵 Net Income: Net income fell to $37.1 million, or $1.35 per diluted share, versus $1.49 last year.

MZTI still has a clean balance sheet. Cash was $218.4 million, current assets were $513.9 million, and current liabilities were $198.9 million at the end of the latest quarter.

But we are not short because the balance sheet is bad.

We are short because the earnings trend, retail trend, commodity setup, and chart are all pointing the same way.

📐 Valuation Is Still Too Rich

MZTI is cheaper than it used to be, but that does not mean it is cheap.

The stock just closed at $111.94, down from a 52-week high of $190.96. A lot of investors will look at that and say, “It’s already down too much.”

I disagree.

I have made significant money over time pressing shorts on stocks that were already down but still ready to break down. A stock can fall 30%, look “cheap,” and then fall another 30% if estimates come down and the market stops paying a premium multiple.

MZTI still trades around 17.5x–17.9x trailing earnings and about 1.6x sales, which is not distressed pricing for a company with negative sales growth and falling retail volume.

Compared with food peers, MZTI’s price/sales ratio is still higher than Hormel, J.M. Smucker, Smithfield, Pilgrim’s Pride, and Conagra in the MarketBeat peer comparison.

That leaves room for a multiple reset.

🧭 Technicals Agree: This Chart Looks Tired

The chart is ugly.

❌ Trading near the 52-week low of $110.31

❌ Down hard from the 52-week high of $190.96

❌ Below major moving averages after the earnings breakdown

❌ StockInvest flagged the stock as a Sell candidate and identified longer-term resistance around $123.63

❌ ChartMill gave MZTI a technical rating of 0 out of 10

🎯 Targets: $100 initial, $90 intermediate, $75-$80 if the breakdown accelerates

This is exactly the kind of chart where the first big decline need not be the last.

💥 Trade of the Week: Short MZTI With a Defined-Risk Put

We’re combining a direct short equity idea with a defined-risk options trade for retail traders who want bearish exposure without unlimited upside risk.

🟢 Trade Setup

• Short MZTI at $111.94 or better

• Initial target: $100

• Intermediate target: $90

• Aggressive target: $75-$80

• Risk review zone: Above $124-$125

At a $111.94 short entry, a move to $100 would produce about $11.94 per share, or 10.7%, before borrow costs. A move to $90 would produce about $21.94 per share, or 19.6%.

🛡️ Options Play

• Buy the MZTI December $115 Put for $11.80

This is a simple bearish put. With MZTI closing at $111.94, the $115 put is already $3.06 in the money, but since we are paying $11.80, we still need the stock to be below $103.20 by expiration to break even. If MZTI breaks lower, the put gains value. If MZTI holds up or rallies, the most you can lose is the premium paid.

📈 Risk-Reward

• Max Risk: $11.80 per share, or $1,180 per contract

• Max Reward: $103.20 per share, or $10,320 per contract if MZTI goes to $0

• Breakeven: $103.20

• Risk-Reward Ratio: about 1:8.7 on max theoretical payoff

Here is the simple payoff math at expiration:

The short stock trade has more direct downside exposure, but it also carries theoretically unlimited risk. The put trade defines the risk upfront.

🛑 Risk Management Tip

Set a risk review above $124-$125 on the short stock trade. That gives the stock room to move while also respecting the technical resistance zone.

For the put trade, the risk is already defined. The most you can lose is $1,180 per contract. Size it so that a full premium loss does not damage your account.

The main risk to the short is that soybean oil costs do not rise as expected, retail volumes stabilize, and investors rotate back into defensive consumer staples. That would not make our thesis impossible, but it would slow it down.

🚀 Catalysts on the Horizon

Keep your eyes on:

1. Soybean oil inflation in China’s soybean demand commitment could tighten the soybean complex and pressure sauce and dressing inputs.

2. In the next earnings report, we want to see whether retail weakness and commodity costs start showing up more clearly.

3. Guidance risk: If management has to acknowledge higher input costs, estimates could come down.

4. Analyst cuts Stephens, which already lowered its target after earnings, and more cuts could follow if the P&L weakens.

5. Technical breakdown: A clean break below $110 could trigger accelerated selling.

🧠 Final Thoughts

MZTI is a classic case of a stock that looks defensive on the surface while warning signs build beneath the surface.

Retail sales are weakening. Volume is falling. Earnings missed. Sales are decelerating. The chart is broken. And the soybean oil headwind may still be ahead of the company, not behind it.

This stock is already down significantly from its highs, but that does not scare us away. Some of the best short opportunities arise after the first big break, when investors are still trying to call the bottom and fundamentals are still deteriorating.

One quick process reminder: almost exactly a year ago, we recommended buying CZR at $25.95. The stock did absolutely nothing for a year, and the buyout was not on our radar. But if we hold until the buyout closes, we should net about a 19.4% gain, implying roughly $30.98 from that original entry.

Sometimes the market pays quickly. Sometimes it takes time. The key is to have a process and press when the setup is there.

✅ Short MZTI at $111.94 or better
💸 Buy the MZTI December $115 Put for $11.80
🎯 Downside targets: $100, then $90, with $75-$80 possible on a full breakdown

We'll be watching this one closely.

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