With easing concerns over the severity of the COVID-19 omicron variant, the food distribution industry’s prospects are improving. The cost of food in the United States increased 7% year-over-year in January 2022, according to the U.S. Bureau of Labor Statistics. It is the highest food inflation since August of 1981. Food distribution stocks are attracting investors' attention due to record-high food prices, which are primarily caused by supply shortages. This is partly evident in the Invesco Dynamic Food & Beverage ETF’s (PBJ) 2.1% gains over the past three months, compared to the SPDR S&P 500 Trust ETF’s (SPY) 6.1% loss.
Because the shortage of food commodities is expected to persist, and demand continues to rise, the food distribution industry should keep growing. Furthermore, technological advancements in food distribution should drive the industry’s long-term growth.
Given this backdrop, we think it could be wise to bet on The Andersons, Inc. (ANDE) and HF Foods Group Inc. (HFFG), which are well-positioned to capitalize on the industry’s growth. These two stocks are currently trading below their 52-week highs.
The Andersons, Inc. (ANDE)
ANDE is an agriculture company that operates internationally in trade, ethanol, plant nutrient, and rail sectors. Its Trade segment operates grain elevators, stores grains, and provides grain marketing, risk management, and corn origination services to its customers and affiliated ethanol facilities. ANDE is headquartered in Maumee, Ohio.
On Dec. 16, 2021, ANDE announced a first-quarter 2022 cash dividend of 18 cents per share payable on Jan. 21, 2022, to shareholders of record as of Jan.3, 2022. This three percent increase from the company's fourth-quarter 2021 cash dividend reflects its strong cash flow and operating performance.
ANDE’s sales and merchandising revenue increased 59% year-over-year to $3 billion for its fiscal third quarter ended Sept. 30, 2021. The company’s adjusted EBITDA grew 20% year-over-year to $56.30 million, while its adjusted net income came in at $5.20 million compared to a$2.90 million loss in the prior-year quarter. Also, its adjusted EPS was $0.15 compared to an $0.08 loss in the year-ago period.
Analysts expect ANDE’s EPS to increase 7.8% year-over-year to $0.49 for the quarter ending March 31, 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. Its revenue is expected to be $12.10 billion in fiscal 2022, representing a 1.4% year-over-year rise. The stock has soared 44.4% in price over the past year to close yesterday’s trading session at $38.78. It is currently trading 3.8% below its 52-week high of $40.29, which it hit on Jan. 12, 2022.
ANDE’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock has a B grade for Value and Sentiment. Within the Agriculture industry, ANDE is ranked #7 of 29 stocks. To see the additional POWR Ratings for ANDE (Growth, Momentum, Quality, and Stability), click here.
HF Foods Group Inc. (HFFG)
HFFG in Greensboro, N.C., is a foodservice distributor to Asian restaurants located in the Southeastern, Pacific, and Mountain West regions of the United States. It distributes Asian specialty food items, meat and poultry products, seafood, fresh produce, packaging, and other commodities.
On Jan. 4, 2022, HFFG announced it had acquired the business operations of Great Wall Seafood Supply Inc., Great Wall Restaurant Supplier Inc. First, Mart Inc. Peter Zhang, CEO of HFFG, said, “The acquisition doubles our distribution network to over 40 states covering approximately 80% of the United States (excluding Alaska and Hawaii) and propels us to over a billion dollars in projected 2022 revenue.”
HFFG’s net revenue increased 54% year-over-year to $215.50 million for its fiscal third quarter, ended Sept. 30, 2021. The company’s adjusted EBITDA grew 190.9% year-over-year to $17.40 million, while its net income came in at $7.90 million, versus a $0.6 million loss in the prior-year quarter. Also, its EPS was $0.15 compared to a $0.01 loss in the year-ago period.
Over the past six months, the stock soared 15.5% in price to close yesterday’s trading session at $6.26. It is currently trading 35.3% below its 52-week high of $9.68, which it hit on Jan. 4, 2022.
HFFG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, it is graded A for Growth and B for Value and Quality.
We also have graded HFFG for Stability, Sentiment, and Momentum. Click here to access all HFFG’s ratings. HFFG is ranked #3 of 85 stocks in the B-rated Food Makers industry.
ANDE shares were trading at $40.00 per share on Tuesday afternoon, up $1.22 (+3.15%). Year-to-date, ANDE has gained 3.33%, versus a -6.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
2 Food Distribution Stocks to Buy on the Dip: The Andersons and HF Foods Group StockNews.com
