The October CPI report showed signs of cooling inflation, with grocery prices rising only 12.4% year-over-year as compared to 13.5% in August, which was the largest 12-month increase in more than 40 years.
However, inflation is still at its multi-decade high levels, and the Fed is far from reaching its target level of 2%. This indicates further interest rate hikes. The economy seems to be on the brink of a recession.
Amid this backdrop, food maker stocks should be the best buys to build a relatively recession-proof portfolio as these businesses are non-cyclical in nature and enjoy inelastic demand for their offerings. Moreover, according to a report by Grand View Research, increasing hybrid lifestyles should help the U.S. packaged food market grow at a CAGR of 4.8% by 2030.
We believe fundamentally sound food maker stocks General Mills, Inc. (GIS), Pilgrim’s Pride Corporation (PPC), and US Foods Holding Corp. (USFD) are great buys for thanksgiving.
General Mills, Inc. (GIS)
GIS manufactures and markets consumer foods globally. The company operates through four segments North America Retail; International; Pet; and Convenience Store & Foodservice.
On November 14, GIS declared a quarterly dividend of $0.54 per share, payable to its shareholders on February 1, 2023. The company pays a $2.16 per share dividend annually, which yields 2.63%.
GIS’ net sales came in at $4.72 billion for the first quarter that ended August 28, 2022, up 3.9% year-over-year. Its net income came in at $820 million, up 30.8% year-over-year. Also, its EPS came in at $1.35, up 32.4% year-over-year.
GIS’ revenue is expected to increase 2.9% year-over-year to $19.54 billion in the fiscal year ending May 2023. Its EPS is expected to grow 4.2% year-over-year to $4.1 in the same period. The company surpassed EPS estimates in three of four trailing quarters, which is impressive.
GIS’ forward P/E of 19.56x is 8.2% lower than the industry average of 21.31x. Its trailing-12-month Price/Cash Flow of 14.73x is 7.6% lower than the industry average of 15.95x.
Over the past year, the stock has gained 30.7% to close the last trading session at $82.78.
GIS’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has a B grade for Quality. GIS is ranked #28 out of 82 stocks in the B-rated Food Makers industry.
Click here for the additional POWR Ratings for Value, Sentiment, Growth, Momentum, and Stability for GIS.
Pilgrim’s Pride Corporation (PPC)
PPC produces, processes, markets, and distributes fresh, frozen, and value-added chicken and pork products to retailers, distributors, and food service operators worldwide. The company offers its products under several brands, including Pilgrim’s, Just BARE, Moy Park, O’Kane, Richmond, Fridge Raiders, and Denny.
During the third fiscal quarter that ended September 25, 2022, PPC’s net sales increased 16.8% year-over-year to $4.47 billion. Its gross profit rose 33.7% from its prior-year quarter to $497.27 million. The company’s adjusted net income attributable to PPC grew 60.5% year-over-year to $260.73 million, while its adjusted EPS grew 62.7% year-over-year to $1.09.
Analysts expect PPC’s revenue to increase 18.9% year-over-year to $17.56 billion for the fiscal year ending December 2022. The company’s EPS is expected to grow 82.8% year-over-year to $4.17 for the same period. Additionally, PPC also beat the consensus EPS estimates in each of the trailing four quarters.
In terms of its forward non-GAAP P/E, PPC is currently trading at 6.29x, 67.4% lower than the industry average of 19.30x. Its forward EV/EBIT multiple of 6.35 is 60.4% lower than the industry average of 16.03.
Over the past month, PPC has gained 19.5% to close its last trading session at $26.21.
The stock has an overall A rating, which equates to a Strong Buy in our rating system. PPC has a B grade for Growth, Value, Stability, and Quality. It is ranked #3 in the same industry.
In addition to the POWR Ratings grades just highlighted, you can see the PPC ratings for Sentiment and Momentum here.
US Foods Holding Corp. (USFD)
USFD, through its subsidiary, US Foods, Inc., markets and distributes fresh, frozen, and dry food and non-food products to food service customers in the United States. It operates 70 distribution facilities and 78 cash-and-carry locations.
On October 10, USFD announced the launch of MOXē (Making Operator Xperiences Easy), a highly advanced all-in-one e-commerce application that provides a personalized one-stop shop where operators can find the right products from a range of over 400,000 items, manage orders as well as track deliveries.
This new application is expected to build on the company’s track record of bringing innovative technology solutions for food service operators that help them save time and money and manage their business more efficiently.
USFD’s net sales increased 13% year-over-year to $8.92 billion for the fiscal quarter ended October 1, 2022. The company’s operating income grew 58.5% year-over-year to $214 million, while its net income came in at $109 million, representing a 70.3% year-over-year increase. Also, its net income per share came in at $0.43, up 79.2% year-over-year.
For fiscal 2022, Street expects USFD’s EPS and revenue to increase 39.1% and 15.7% year-over-year to $2.16 and $34.11 billion, respectively. The stock gained 28.7% over the past month to close the last trading session at $35.94.
USFD’s forward EV/EBITDA of 10.59x is 12% lower than the industry average of 12.03x. Its forward Price/Cash Flow of 12.07x is 19% lower than the industry average of 14.90x.
USFD’s POWR Ratings reflect solid prospects. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. It also has a B grade for Growth and Value. In the same industry, USFD is ranked #82.
To access additional POWR Ratings for USFD for Stability, Sentiment, Momentum, and Quality, click here.
GIS shares were trading at $82.78 per share on Thursday morning, up $0.61 (+0.74%). Year-to-date, GIS has gained 26.46%, versus a -14.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
3 Food Makers Stocks to Buy for Thanksgiving StockNews.com
