The global food service industry is experiencing growth propelled by economic trends favoring technology integration and the establishment of integrated consumption hubs.
Therefore, investors could consider investing in top food maker stocks Danone S.A. (DANOY), Tate & Lyle plc (TATYY), and Ingredion Incorporated (INGR) for December end achievement.
November’s CPI for all food rose 2.9% from the same month last year. Also, USDA's December 2023 forecast reveals a 5.8% annual increase in overall food prices, with food-away-from-home prices predicted to rise by 7.1%. Moreover, food prices are expected to rise by 1.2% overall, including a 4.9% increase for food-away-from-home prices.
Contrarily, the U.S. food service industry is poised for substantial growth, rebounding from pandemic setbacks, with anticipated positive trends in various sectors and channels, including increased consumer engagement through leisure and innovative food service-retail partnerships.
The global food service market is projected to reach a valuation of $2.65 trillion in 2023 and is expected to expand at a CAGR of 10.8% to reach $5.42 trillion by 2030.
In addition, the global food processing and handling equipment market is experiencing robust growth, attributed to a surge in demand for prepared foods, technological advancements, and the presence of investment prospects. The food processing market is estimated to grow at a CAGR of 11.8% and reach $400.43 billion by 2030.
Furthermore, the expansion of the U.S. organic food and beverages market is propelled by growing consumer awareness of health benefits, changing purchasing behavior, and the rising popularity of non-GMO products. Increased accessibility in mainstream outlets and the alignment with environmental sustainability further contribute to market growth.
The global organic food and beverages market is expected to grow at a CAGR of 11.7% from 2023 to 2030.
Considering these conducive trends, let’s examine the fundamentals of three Food Makers stock picks, beginning with the third choice.
Stock #3: Danone S.A. (DANOY)
Based in Paris, France, DANOY is a global food and beverage company known for dairy, plant-based products, specialized nutrition, and bottled water under popular brands. It operates in various segments and distributes its products through retail, convenience stores, healthcare, and e-commerce.
DANOY’s trailing-12-month gross profit margin of 46.51% is 37.2% higher than the industry average of 33.89%. Its 12.29% trailing-12-month EBIT margin is 45.9% higher than the 8.43% industry average.
In the six months ended June 30, 2023, DANOY reported sales and operating income of €14.17 billion ($15.62 billion) and €1.68 billion ($1.85 billion), up 6.3% and 21.8% year-over-year, respectively. The company's net income and EPS grew 45.9% and 49.1% from the previous-year period to €1.13 billion ($1.24 billion) and €1.70, respectively.
Street expects DANOY’s revenue and EPS to grow 4.1% and 1.9% year-over-year to $30.54 billion and $0.74, respectively, for the fiscal year ending December 2023. The company surpassed the revenue estimates in each of the trailing four quarters, which is impressive.
DANOY’s shares have gained 22% over the past year and 22.3% year-to-date to close the last trading session at $12.86.
DANOY’s POWR Ratings reflect its positive prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
DANOY has an A grade for Stability and a B for Growth. Within the Food Makers industry, it is ranked #10 among 79 stocks.
In addition to the POWR Ratings stated above, one can access DANOY’s additional Value, Momentum, Sentiment, and Quality ratings here.
Stock #2: Tate & Lyle plc (TATYY)
Headquartered in London, the United Kingdom, TATYY offers food and beverage solutions globally through three segments: Food & Beverage Solutions; Sucralose; and Primary Products. The company provides a range of ingredients, including dairy products, sweeteners, fibers, and industrial starches.
On December 20, TATYY renewed its third-year partnership with the China Foundation for Rural Development, focusing on improving children's diets and providing nutrition education in Yunnan and Guizhou provinces.
The initiative includes supplying snacks, installing kitchen equipment, and collaborating with Chinese authorities. Since 2021, it has benefited over 3,000 children in 11 schools.
TATYY’s trailing-12-month gross profit margin of 50.20% is 48.1% higher than the industry average of 33.89%. Its 13.02% trailing-12-month EBIT margin is 54.5% higher than the 8.43% industry average.
During the six months that ended September 30, 2023, TATYY's revenue increased marginally from the prior-year period to £857 million ($1.09 billion). The company reported adjusted EBITDA of £178 million ($226.17 million), up 3.5% year-over-year. Its adjusted operating profit and EPS grew 4.4% and 15.3% year-over-year to £143 million ($181.70 million) and £30.1, respectively.
TATYY’s revenue is expected to grow 3.1% year-over-year to $2.22 billion for the fiscal year ending March 2024.
TATYY’s shares increased 10.4% over the past month to close the last trading session at $34.21.
TATYY’s POWR Ratings reflect this sound outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Stability, Sentiment, and Quality. Within the same industry, it is ranked #7.
Click here for TATYY’s additional Growth, Value, and Momentum ratings.
Stock #1: Ingredion Incorporated (INGR)
INGR produces and sells sweeteners, starches, and nutrition ingredients derived from corn for various industries globally. Their products include starches for processed foods, industrial applications, and specialty paper, as well as sweeteners like glucose syrups and high fructose corn syrup for food and beverages.
On November 13, INGR entered a definitive agreement to divest its South Korean business, aiming to sharpen customer focus and pursue global growth opportunities as part of its business transformation strategy. The transaction is set to conclude in the first quarter of 2024, subject to regulatory approvals and customary closing conditions.
INCY’s trailing-12-month EBIT margin of 11.12% is 32% higher than the industry average of 8.43%. Its 13.80% trailing-12-month EBITDA margin is 22.5% higher than the 11.26% industry average.
In the third quarter, which ended September 30, 2023, INGR’s net sales grew marginally year-over-year to $2.03 billion. The company’s adjusted operating income increased 14.7% from the previous-year quarter to $219 million. Moreover, its EPS grew 34.7% from the prior-year quarter to $2.33.
The company expects its outlook for full-year 2023 adjusted EPS to be in the range of $9.05 to $9.45.
Analysts expect INGR’s revenue and EPS to grow 5.2% and 12.1% year-over-year to $2.09 billion and $1.85 for the fourth quarter ending December 2023, respectively. The company surpassed the EPS estimates in three of the trailing four quarters.
The stock has gained 11.7% over the past nine months and 11.5% year-to-date to close the last trading session at $109.19.
INGR’s optimistic outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Value and Stability. Within the same industry, it is ranked #6.
To see INCY’s additional POWR Ratings for Growth, Momentum, and Quality, click here.
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DANOY shares were trading at $12.93 per share on Wednesday afternoon, up $0.07 (+0.54%). Year-to-date, DANOY has gained 26.22%, versus a 26.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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