The food-making industry is thriving due to a demand surge driven by the rising global population and technological advancements. Therefore, it could be worth investing in fundamentally strong food maker stocks SpartanNash Company (SPTN), John B. Sanfilippo & Son, Inc. (JBSS), and Lifeway Foods, Inc. (LWAY).
Before diving deeper into their fundamentals, let’s discuss what’s shaping the food maker industry’s prospects.
The food-making industry is vital for human sustenance. Centered on transforming raw ingredients into essential consumables, it enjoys an inelastic demand. Thanks to this inelastic demand, the industry exhibits resilience. The recent decline in inflation is poised to boost the demand for food, thereby benefiting food makers.
Statista projects the global food market to grow at a 6.5% CAGR between 2024 and 2028. Moreover, the U.S. food market’s revenue is expected to reach $1.01 trillion this year and grow at a 3.8% CAGR between 2024 and 2028. The market's growth will be fueled by food consumption as a result of rising population growth.
Additionally, evolving lifestyles, the rising preference among millennials for at-home and healthy meals, and the growing interest in nutritious foods are driving the demand for specialty foods. The global specialty foods market is anticipated to grow at a CAGR of 13.4% and reach $361.30 billion by 2027.
Apart from that, the food manufacturing industry is undergoing rapid transformation due to the use of advanced technology and automation. Such initiatives are helping bring enhanced operational efficiency and supply chain visibility.
Digital technologies like sensors, blockchain, RFID, IoT, and AI are utilized to track products, manage inventory, improve transparency, and enhance quality control and safety in the food industry.
Considering these conducive trends, let’s analyze the fundamentals of the three Food Makers picks, beginning with the third choice.
Stock #3: SpartanNash Company (SPTN)
SPTN distributes and retails grocery products. It operates through Wholesale and Retail segments, offering a wide range of food and household items to independent retailers and national accounts and operating retail supermarkets under various banners.
On December 5, 2023, SPTN announced a partnership with Junior Achievement to create an immersive grocery experience at JA Finance Park, providing high school students with hands-on learning about careers in the grocery industry and financial planning. Opening in January 2024, it aims to inspire and educate students through interactive activities focused on budgeting and grocery purchases.
SPTN’s CEO Tony Sarsam said, "Our new partnership with JA of the Michigan Great Lakes aligns with SpartanNash's mission to deliver the ingredients for a better life, including the careers that make a better life possible."
In terms of the trailing-12-month asset turnover ratio, SPTN’s 4.19x is 401.6% higher than the 0.84x industry average.
For the third quarter (ended October 7, 2023), SPTN’s total revenues came in at $2.26 billion. Its adjusted operating earnings rose 24.2% over the prior-year quarter to $10.02 million. In addition, the company’s adjusted earnings from continuing operations came in at $18.76 million and $0.54 per share.
For the quarter ending December 31, 2023, SPTN’s EPS is expected to increase 44.5% year-over-year to $0.40. Its revenue for the quarter ending June 30, 2024, is expected to increase 1.3% year-over-year to $2.34 billion. Over the past three months, the stock has gained 4.3% to close the last trading session at $22.95.
SPTN’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Growth. Within the Food Makers industry, it is ranked #17 out of 79 stocks. In total, we rate SPTN on eight different levels. Beyond what we stated above, we also have given SPTN grades for Momentum, Stability, Sentiment, and Quality. Get all the SPTN ratings here.
Stock #2: John B. Sanfilippo & Son, Inc. (JBSS)
JBSS and its subsidiary, JBSS Ventures, LLC, process and distribute tree nuts and peanuts in the United States. The company offers raw and processed nuts, including almonds, pecans, peanuts, black walnuts, English walnuts, cashews, macadamia nuts, pistachios, pine nuts, Brazil nuts, and filberts in various styles and seasonings.
In terms of the trailing-12-month EBIT margin, JBSS’ 9.14% is 8.9% higher than the 8.40% industry average. Likewise, its 6.61% net income margin is 35.1% higher than the 4.90% industry average. Additionally, the stock’s 23.32% trailing-12-month Return on Common Equity is 99.7% higher than the industry average of 11.68%.
JBSS’ revenue for the first quarter ended September 28, 2023, came in at $234.11 million. Its gross profit increased 12.6% year-over-year to $57.02 million. The company’s net income rose 13.1% year-over-year to $17.59 million. Also, its EPS came in at $1.51, representing an increase of 12.7% year-over-year.
Over the past year, JBSS’ stock has gained 29.1% to close the last trading session at $103.04.
It’s no surprise that JBSS has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #12 in the same industry. It has a B grade for Value and Quality. Click here to see JBSS’ Growth, Momentum, Stability, and Sentiment ratings.
Stock #1: Lifeway Foods, Inc. (LWAY)
LWAY produces and markets probiotic-based products in the United States and internationally. Its primary product is drinkable kefir, a cultured dairy product in various organic and non-organic sizes, flavors, and types.
On August 23, 2023, LWAY announced plans to enhance Farmer Cheese production capacity, streamline processes with technology, and introduce automation to meet growing demand. The company also detailed upcoming marketing initiatives to introduce Lifeway Farmer Cheese, a versatile, probiotic-rich product, as a convenient alternative to the trending "blended cottage cheese" recipes on social media.
In terms of the trailing-12-month EBIT margin, LWAY’s 8.58% is 2.2% higher than the 8.40% industry average. Likewise, its 5.27% trailing-12-month net income margin is 7.7% higher than the industry average of 4.90%. Furthermore, the stock’s 5.59% trailing-12-month levered FCF margin is 15.1% higher than the industry average of 4.86%.
For the third quarter that ended September 30, 2023, LWAY’s net sales increased 7.2% year-over-year to $40.90 million. The company’s gross profit rose 46.8% year-over-year to $11.14 million. In addition, its net income and EPS rose 247.1% and 283.3% over the prior-year quarter to $3.41 million and $0.23, respectively.
Analysts expect LWAY’s EPS and revenue for the quarter ending December 31, 2023, to increase 320% and 11.6% year-over-year to $0.21 and $40 million, respectively. Over the past nine months, the stock has gained 123.1% to close the last trading session at $13.41.
LWAY’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B for Sentiment and Quality. Within the Food Makers industry, it is ranked #4. To see LWAY’s ratings for Value, Momentum, and Stability, click here.
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JBSS shares were trading at $105.57 per share on Tuesday morning, up $2.53 (+2.46%). Year-to-date, JBSS has gained 2.46%, versus a -0.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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