Inflation slowed down in November to 7.1% from a year ago, dropping sharply from the decades-high 9.1% increase in June. However, food prices rose 0.5% for the month.
Despite high food inflation, data from the Food Industry Association (FIA) revealed that U.S. shoppers are spending even more money at stores compared to 2021, underscoring consumer resilience and hopes for the food and beverages market.
On top of it, the global food and beverages market is expected to grow from $5.82 trillion in 2021 to $6.38 trillion in 2022 at a CAGR of 9.7%. The market is expected to grow to $8.91 trillion in 2026 at a CAGR of 8.7%.
As the food sector faces a stable demand despite the economic volatilities, fundamentally strong food stocks The Hershey Company (HSY), Kellogg Company (K), and Flowers Foods, Inc. (FLO) could be solid buys this holiday season.
The Hershey Company (HSY)
HSY is a popular snacks company offering confectionery and pantry items globally. The company operates through three segments: North America Confectionery; North America Salty Snacks; and International.
On November 4, HSY announced quarterly dividends of $1.036 on the common stock and $0.942 on the class B common stock. The dividend was payable on December 15, 2022.
It is the 372nd consecutive regular dividend on the Common Stock and the 153rd consecutive regular dividend on the Class B Common Stock, reflecting HSY’s strong cash generation ability.
For the fiscal third quarter ended October 2, HSY’s net sales came in at $2.73 billion, up 15.6% year-over-year. Its non-GAAP gross profit grew 10.8% year-over-year to $1.16 billion. In addition, its non-GAAP net income came in at $447.07 million, up 2.8% year-over-year, while its non-GAAP EPS increased 3.3% year-over-year to $2.17.
Analysts expect HSY’s revenue to increase 10.7% year-over-year to $2.57 billion in the fiscal fourth quarter of 2022. Its EPS is expected to increase 4.8% year-over-year to $1.77. It surpassed EPS and revenue estimates in all four trailing quarters.
The stock has gained 25.4% over the past year to close the last trading session at $234.98. It has gained 9.3% over the past six months.
HSY has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
HSY has a B grade for Quality and Sentiment. In the B-rated Food Makers industry, it is ranked #24 of 83. Click here for the additional POWR Ratings for HSY for Growth, Value, Momentum, and Stability.
Kellogg Company (K)
K manufactures and markets snacks and convenience foods in multiple countries. Its principal products include crackers, crisps, savory snacks, toaster pastries, cereal bars, granola bars and bites, ready-to-eat cereals, frozen waffles, veggie foods, and noodles.
On December 12, K announced the approval of a share repurchase authorization of up to $1.5 billion, under which the company might buy back its shares at its discretion from January 1, 2023, through December 31, 2025. The company uses buybacks to return cash to shareowners opportunistically.
On October 28, K declared a dividend of $0.59 per share on its common stock, which was payable on December 15, 2022. This marks the 392nd dividend that K has paid since 1925. This reflects the company’s shareholder return ability.
K’s net sales came in at $3.95 billion for the third quarter that ended October 1, up 8.9% year-over-year, while its organic net sales rose 13.4% year-over-year to $4.11 billion. The company’s adjusted gross profit increased 4.1% year-over-year to $1.22 billion, and its adjusted EPS amounted to $1.01.
K’s revenue is expected to increase 6.4% year-over-year to $3.64 billion in the fiscal fourth quarter ending December 2022. Similarly, its EPS is likely to gain 2.6% year-over-year to $0.85 in the same quarter.
Moreover, the company has a remarkable earnings and revenue surprise history as it surpassed its EPS and revenue estimates in each of its trailing four quarters.
The stock has gained 14.6% over the past year to close the last trading session at $71.81. Moreover, it has gained 4.3% over the past six months.
K’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. K also has a B grade for Quality and is ranked #29 within the Food Makers industry.
Beyond what is stated above, we’ve also rated K for Value, Growth, Momentum, Sentiment, and Stability. To access more of K’s POWR Ratings, click here.
Flowers Foods, Inc. (FLO)
FLO operates as a producer and marketer of packaged bakery products in the United States. The company offers its products under Nature’s Own, Dave’s Killer Bread, Wonder, Canyon Bakehouse, Mrs. Freshley’s, and Tastykake brand names.
On December 13, FLO announced a definitive agreement to acquire Papa Pita Bakery, a manufacturer and distributor of baked goods. The acquisition aims to expand FLO’s presence and is expected to be completed in the first quarter of 2023.
On November 18, FLO declared a quarterly dividend of $0.22 per share, reflecting an increase of 4.8% from the same quarter last year. This is the 81st consecutive quarterly dividend paid by the company and was paid on December 16, 2022, to shareholders. This reflects the company’s cash generation ability.
FLO’s sales increased 12.7% year-over-year to $1.16 billion in the fiscal third quarter ended October 8. Its adjusted EBITDA grew 1.6% from the same period last year to $120.41 million, while its adjusted net income per common share was consistent with the prior-year quarter at $0.30.
Analysts expect FLO’s revenue and EPS for the quarter ending December 2022 to increase 12.4% and 17.2% year-over-year to $1.11 billion and $0.23, respectively. Moreover, FLO has surpassed consensus EPS estimates in three of the trailing four quarters, which is impressive.
FLO has gained 16.2% over the past six months and 12.6% over the past three months to close its last trading session at $29.04.
Its strong fundamentals are reflected in its POWR Ratings. FLO has an overall rating of B, equating to Buy in our proprietary rating system. It also has a B grade in Quality. The stock is ranked #19 in the same industry.
In addition, FLO’s ratings for Growth, Value, Momentum, Stability, and Sentiment can be seen here.
HSY shares were trading at $234.87 per share on Thursday afternoon, down $0.11 (-0.05%). Year-to-date, HSY has gained 23.60%, versus a -18.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
3 Food Stocks to Bite Into This Holiday Season StockNews.com
