The food distribution sector has grown considerably over the past year, driven by the surging food prices and robust domestic and international consumer demand. According to Goldman Sachs, food commodity prices are already up 6% so far this year.
As the war between Russia and Ukraine escalates, global food prices will likely jump further because Russia is a major exporter of wheat and corn. Furthermore, with major countries closing their airspaces and withdrawing from trade deals with Russia, commodity supply chains are expected to be disrupted.
Given the backdrop, we think investing in food distribution stocks The Andersons, Inc. (ANDE) and SpartanNash Company (SPTN) could be profitable. The stocks are well-positioned to capitalize on the growing consumer demand.
The Andersons, Inc. (ANDE)
ANDE is an agriculture company that operates in the U.S. and internationally. The Maumee, Ohio, company operates in four segments: Trade; Ethanol; Plant Nutrient; and Rail. The company provides grain marketing, risk management, corn origination services, commodity merchandising, facility operations, and marketing services to ethanol plants and agronomic services.
Last December, ANDE declared a three percent increase in its cash dividend to $0.18 per share for the first quarter of 2022, to be paid on Jan. 21, 2022.The increase in the cash dividend reflects the company’s strong cash flow and operational performance.
In its fiscal 2021 fourth quarter, ended December 31, 2021, ANDE’s sales and merchandising revenues increased 50.8% year-over-year to $3.78 billion. Its gross profit rose 56.5% year-over-year to $194.01 million. Its net income from continuing operations grew 311.3% year-over-year to come at $65.47 million, and the company’s net income increased 325.6% from its year-ago value to $62.34 million. Its adjusted earnings per share attributable to ANDE common shareholders from continuing operations rose 103.6% from its year-ago value to $1.14.
The $2.73 billion consensus revenue estimate for its fiscal 2022 first quarter, ending March 31, 2022, represents 3.8% year-over-year growth from the same period in 2021. The $0.45 consensus EPS estimate for the current quarter indicates marginal year-over-year growth from the same period last year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 17.8% in price year-to-date and 74.5% over the past year. ANDE closed yesterday’s trading session at $45.60.
ANDE’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ANDE has a grade of B for Growth, Value, and Sentiment. Within the Agriculture industry, it is ranked #9 of 29 stocks.
To see additional POWR Ratings (Stability, Momentum, and Quality) for ANDE, click here.
SpartanNash Company (SPTN)
SPTN markets, distributes, and retails grocery products. The Grand Rapids, Mich., company operates in three segments: Food Distribution, Military, and Retail. SPTN provides retailers with dry groceries, dairy products, floral products, general merchandise, tobacco products, health and beauty care products, and value-added services. It serves independent retailers, foodservice distributors, e-commerce providers, military commissaries, and neighborhood markets.
Yesterday, SPTN introduced newly reformulated Our Family cheese offerings. This improvisation of Our Family products is expected to expand the company’s customer base and boost profits.
On Feb. 8, 2022, SPTN expanded its partnership with Flashfood, a food waste reduction company with 44 Family fare and VG’s grocery store locations in Michigan, Iowa, and Nebraska. The company wants to further cut down on food waste and grocery bills. This partnership might promote sustainability and boost revenue streams for the company.
SPTN's operating earnings increased 91.6% year-over-year to $33.35 million in its fiscal fourth quarter, ended Jan. 1, 2022. The company's earnings before income taxes rose 116.6% year-over-year to $30.39 million. SPTN's net earnings grew 83.9% year-over-year to $22.25 million. And its net earnings per share improved 82.4% year-over-year to $0.62.
Analysts expect SPTN’s revenue for its fiscal year 2022 first quarter, ending March 2022, to come in at $2.69 billion, representing a marginal rise year-over-year. The Street expects the company’s EPS to be $0.61, representing an 8.9% increase year-over-year. Also, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the four trailing quarters.
Shares of SPTN have increased 9.2% year-to-date and 54.4% over the past year. It closed yesterday's trading session at $28.14.
SPTN has an overall B rating, which translates to Buy in our proprietary rating system. SPTN has an A grade for Value. Among the 84 stocks in the B-rated Food Makers industry, it is ranked #20.
Click here to see the additional POWR Ratings for Momentum, Growth, Quality, Sentiment, and Stability for SPTN.
Click here to checkout our Retail Industry Report for 2022
ANDE shares were trading at $44.70 per share on Tuesday morning, down $0.90 (-1.97%). Year-to-date, ANDE has gained 15.47%, versus a -8.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
2 Surging Food Distribution Stocks with More Room to Run: Andersons and SpartanNash StockNews.com
