Inflation surged 8.2% year-over-year in September, and the 'food at home' index climbed 13%. Moreover, according to the U.S. Department of Agriculture, food prices are expected to increase between 9% and 10% in 2022 and 2.5% to 3.5% in 2023.
On the other hand, the demand remains steady due to its non-cyclical nature. In addition, the demand for organic food is soaring amid rising health awareness. According to Statista, organic food sales in the United States amounted to $57.50 billion in 2021.
Furthermore, according to Future Market Insights, the packaged food market is expected to grow at a 5.3% CAGR from 2022 to 2032.
Given the backdrop, investors might consider buying fundamentally sound food stocks, General Mills, Inc. (GIS) and Kellogg Company (K), which could deliver stable returns.
General Mills, Inc. (GIS)
GIS is involved in the manufacturing and marketing of consumer foods globally. The company operates through four segments: North America Retail; International; Pet; and Convenience Store & Foodservice.
On September 21, 2022, Jeff Harmening, GIS’ Chairman and CEO, said, "Given the strength of our first-quarter results and confidence in our ability to adapt to continued volatility ahead, we are increasing our full-year outlook for net sales, operating profit, and EPS growth."
GIS' net sales came in at $4.72 billion for the first quarter that ended August 28, 2022, up 3.9% year-over-year. Moreover, 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’ forward P/E of 18.24x is 5% lower than the industry average of 19.21x. Its trailing-12-month of Price/Cash Flow of 13.64x is 4.1% lower than the industry average of 14.23x.
GIS' revenue is expected to increase 2.8% year-over-year to $19.53 billion in 2023. Its EPS is expected to grow 4.1% year-over-year to $4.1 in 2023. It surpassed EPS estimates in three of four trailing quarters. Over the past year, the stock has gained 22.3% to close the last trading session at $76.67.
GIS' 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.
GIS has a B grade for Quality. In the B-rated Food Makers industry, it is ranked #27 out of 86 stocks. Click here for the additional POWR Ratings for Value, Sentiment, Growth, Momentum, and Stability for GIS.
Kellogg Company (K)
K has manufactured snacks and convenience foods in 21 countries and marketed its products in 180 countries. The Company's segments include North America; Europe; Latin America; and AMEA (Asia, Middle East Africa).
K's net sales came in at $3.86 billion for the second quarter that ended July 2, 2022, up 8.7% year-over-year. The company's total assets came in at $18.94 billion for the period ended July 2, 2022, compared to $18.19 billion for the period ended January 1, 2022.
K’s forward P/E of 18.16x is 5.5% lower than the industry average of 19.21x. Its trailing-12-month Price/Cash Flow of 13.42x is 5.7% lower than the industry average of 14.23x.
K's revenue is expected to increase 5% year-over-year to $14.89 billion in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 15.7% to close the last trading session at $71.76.
K's overall B rating equates to a Buy in our POWR Ratings system. It has a B for Stability and Quality. K is ranked #21 in the same industry.
Beyond what is stated above, we've also rated K for Value, Growth, and Momentum. To see more of K’s POWR Ratings, click here.
GIS shares were trading at $76.96 per share on Friday afternoon, up $0.29 (+0.38%). Year-to-date, GIS has gained 17.57%, versus a -20.58% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
2 Food Stocks That Are Still Appetizing in 2022 StockNews.com
