Inflation rose 7.1% from a year ago in November 2022, easing for the second consecutive month. Moreover, the Federal Reserve’s latest economic projections show the economy growing at a pace of 0.5% in 2023.
The Food CPI index rose 0.5% in November, lower than October’s 0.6% increase. Despite the ongoing recession concerns and high prices, the demand for food remains strong. Moreover, the holiday season has bolstered food demand further. The food and beverages market is expected to grow at a CAGR of 8.7% to reach $8.90 trillion by 2026.
Amid this backdrop, it could be wise to buy fundamentally strong food stocks Sysco Corporation (SYY), Flowers Foods, Inc. (FLO), Pilgrim's Pride Corporation (PPC), and Tiger Brands Limited (TBLMY).
Sysco Corporation (SYY)
SYY engages in the marketing and distribution of various food and related products, primarily to the food service or food-away-from-home industry worldwide. It operates through U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other segments.
Over the last three years, SYY’s dividend payouts have grown at a 7.2% CAGR. Its four-year average dividend yield is 2.41%, and its forward annual dividend of $1.96 per share translates to a 2.56% yield. It is expected to pay a quarterly dividend of $0.49 per share on January 27, 2023.
On November 11, SYY received its first series-produced battery electric Freightliner eCascadia, which is a zero-emission Class 8 truck. SYY’s senior vice president of corporate affairs and chief communications officer, Neil Russell, stated that the addition is a major milestone in the company’s climate journey as it works toward electrifying 35% of its U.S. fleet by 2030.
SYY’s non-GAAP gross profit for the first quarter ended October 1, 2022, increased 17.3% year-over-year to $3.48 billion. The company’s non-GAAP net earnings increased 14.6% year-over-year to $492.60 million. Its adjusted EBITDA increased 7.5% year-over-year to $916.86 million. Also, its non-GAAP EPS increased 16.9% from the prior-year period to $0.97.
Analysts expect SYY’s EPS and revenue for the quarter ending December 31, 2022, to increase 44.3% and 14.1% year-over-year to $0.82 and $18.62 billion, respectively. Over the past three months, the stock has gained 8.1% to close the last trading session at $76.45.
SYY’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong 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 Growth and a B for Value and Stability. Within the B-rated Food Makers industry, it is ranked #7 out of 83 stocks.
To see the additional ratings of SYY for Momentum, Sentiment, and Quality, click here.
Flowers Foods, Inc. (FLO)
FLO produces and markets packaged bakery products. It offers fresh bread, buns, rolls, snack cakes, and tortillas, as well as frozen bread and rolls under the Nature's Own, Dave's Killer Bread, Wonder, Canyon Bakehouse, Mrs. Freshley's, and Tastykake brand names.
Over the last three years, FLO’s dividend payouts have grown at a 5.1% CAGR. Its four-year average dividend yield is 3.31%, and its forward annual dividend of $0.88 per share translates to a 3.06% yield. It paid a quarterly dividend of $0.22 per share on December 16, 2022.
On December 13, 2022, FLO announced a definitive agreement to acquire Papa Pita Bakery. FLO president and CEO Ryals McMullian, stated, "Papa Pita has been an important co-manufacturer of Flowers products for many years, and I'm thrilled about the opportunity to realize manufacturing and distribution synergies, in addition to expanding our geographic reach and welcoming the passionate Papa Pita team to Flowers."
FLO’s sales for the fiscal third quarter ended October 8, 2022, increased 12.7% year-over-year to $1.16 billion. The company’s net income increased 4.3% year-over-year to $40.53 million. Moreover, its adjusted EPS remained flat year-over-year at $0.30. Also, its adjusted EBITDA increased 1.6% year-over-year to $120.41 million.
FLO’s EPS and revenue for the fiscal quarter ended December 31, 2022, are expected to increase 17.2% and 12.4% year-over-year to $0.23 and $1.11 billion, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
Over the past three months, the stock has gained 16.4% to close the last trading session at $28.74.
FLO’s strong fundamentals are reflected in its POWR Ratings. The company has an overall rating of B, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth and Quality. It is ranked #10 in the Food Makers industry.
We have also given FLO grades for Value, Momentum, Stability, and Sentiment. Get all FLO ratings here.
Pilgrim's Pride Corporation (PPC)
PPC engages in producing, processing, marketing, and distributing fresh, frozen, and value-added chicken and pork products to retailers, distributors, and food service operators worldwide.
The company offers fresh products, prepared products, delicatessen products, salads, formed nuggets and patties, bone-in chicken parts, processed meats, sandwiches, deli counter meats, pulled pork balls, meatballs, and coated foods, among various other products.
PPC’s net sales for the third quarter ended September 25, 2022, increased 16.8% from the year-ago period to $4.47 billion. The company’s adjusted net income attributable to PPC increased 60.5% year-over-year to $260.73 million.
Its adjusted EBITDA increased 32.7% year-over-year to $460.46 million, while its adjusted EPS attributable to PPC came in at $1.09, representing a 62.7% increase from the prior-year quarter.
PPC’s EPS and revenue for fiscal 2022 are expected to increase 78.7% and 18.2% year-over-year to $4.07 and $17.46 billion, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 3.1% over the past three months to close the last trading session at $23.73.
PPC’s solid prospects are reflected in its POWR Ratings. The company has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. In addition, it has a B grade for Growth, Value, Stability, and Quality. It is ranked #4 in the same industry.
In total, we rate PPC on eight different levels. Beyond what we stated above, we also gave PPC grades for Momentum and Sentiment. Get all PPC ratings here.
Tiger Brands Limited (TBLMY)
Headquartered in Bryanston, South Africa, TBLMY engages in manufacturing, marketing, and distributing consumer goods. The company offers baby care products under the Purity brand, bakeries under the Albany and Tinkies brands, and culinary fruit veg products under the Crosse & Blackwell, Benny, All Gold, and Spray and Cook, among others.
TBLMY’s four-year average dividend yield is 7.28%, and its trailing twelve months dividend of $0.52 per share translates to a 4.00% yield. It is expected to pay a semi-annual dividend of $0.38 per share on February 2, 2023.
For the fiscal year ended September 30, 2022, TBLMY’s total revenue increased 9.9% year-over-year to R34.03 billion ($1.99 billion). The company’s total assets increased 5.2% year-over-year to R24.02 billion ($1.41 billion). Its gross profit increased 17.1% year-over-year to R10.32 billion ($605.93 million).
Over the past six months, the stock has gained 46.8% to close the last trading session at $13.02.
TBLMY’s positive outlook is reflected in its POWR Ratings. The company has an overall rating of A, which equates to a Strong Buy. In addition, it has a B grade for Growth, Value, Stability, and Quality. It is ranked first in the Food Makers industry.
Click here to see the additional ratings of TBLMY for Momentum and Sentiment.
SYY shares were trading at $75.26 per share on Tuesday afternoon, down $1.19 (-1.56%). Year-to-date, SYY has declined -1.56%, versus a -1.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
4 Food Stocks Positioned to Profit in 2023 StockNews.com
