Over the past year, Americans have witnessed their wallets becoming leaner due to rampant inflation. However, inflation has fallen significantly from last year’s peak and is expected to reach the Fed’s long-term target, thereby benefiting the food makers industry.
Moreover, the use of technology, changing consumer preferences, expansion into new territories, innovations and investments in R&D are expected to drive the industry’s growth. Therefore, it could be prudent to buy fundamentally strong food maker stocks: John B. Sanfilippo & Son, Inc. (JBSS), HF Foods Group Inc. (HFFG), and Ingredion Incorporated (INGR).
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s shaping the industry’s prospects.
The food manufacturing industry involves transforming raw food into food products for consumption. The sector manufactures and processes foods like meats, seafood, dairy products, fruits and vegetables, baked goods, candy, grains and oilseeds, beverages, etc.
The fortunes of the food manufacturing industry rest largely on food consumption. The U.S. dairy consumption stood at 653 pounds in 2022, 63 pounds above the historical average, while cheese consumption was at an all-time high last year. Similarly, an average U.S. resident consumes 224.6 pounds of meat every year, and is expected to remain strong.
Apart from rising food consumption, factors such as the surge in e-commerce, rising demand for healthier food options, population growth, use of automation, use of technologies like artificial intelligence and IoT, expansion into international markets, cost saving through the use of sustainable packaging and manufacturing procedures, and product innovation and development are all boosting the industry’s growth.
Additionally, evolving lifestyles and the increasing popularity of plant-based and organic foods are contributing to the sector's expansion. The U.S. packaged food market is expected to grow at a CAGR of 4.8% to reach $1.59 trillion by 2030. Moreover, the global food market is anticipated to grow at a CAGR of 6.7% between 2023 and 2028.
Considering these conducive trends, let’s delve deeper into the fundamentals of the three best Food Makers stocks, starting with the third choice.
Stock #3: John B. Sanfilippo & Son, Inc. (JBSS)
JBSS processes and distributes tree nuts and peanuts in the United States. The company offers raw and processed nuts, peanut butter, snack and trail mixes, baking ingredients, bulk food products, and sunflower kernels. It also operates a retail store and provides under Fisher, Orchard Valley Harvest, Squirrel Brand, and Southern Style Nuts brands, as well as under various private brands.
On September 29, 2023, JBSS announced the completion of the acquisition of snack bar assets from TreeHouse Foods, marking its largest-ever strategic move. The acquisition enhances JBSS's product diversity, helping it offer a comprehensive snack bar portfolio to private-label customers and positioning the company for sustained growth.
In terms of the trailing-12-month net income margin, JBSS’s 6.61% is 35.1% higher than the 4.90% industry average. Likewise, its 23.32% trailing-12-month Return on Common Equity is 99.7% higher than the industry average of 11.68%. Furthermore, the stock’s 15.28% trailing-12-month Return on Total Assets is 216.1% higher than the industry average of 4.83%.
JBSS’s net sales for the fiscal first quarter ended September 28, 2023, amounted to $234.11 million. Its gross profit increased 12.6% year-over-year to $57.02 million. Its income from operations increased 9.7% over the prior-year quarter to $24.58 million.
The company’s net income increased 13.1% year-over-year to $17.59 million. Additionally, its EPS came in at $1.51, representing an increase of 12.7% year-over-year.
Over the past year, the stock has gained 32.8% to close the last trading session at $105.16.
JBSS’ strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Quality. It is ranked #13 out of 79 stocks within the Food Makers industry. In addition to the POWR Ratings I’ve just highlighted, you can see JBSS’ ratings for Growth, Value, Momentum, Stability, and Sentiment here.
Stock #2: HF Foods Group Inc. (HFFG)
HFFG markets and distributes fresh produce, frozen and dry food, and non-food products to Asian and Chinese restaurants and other food service customers in the United States. The company offers seafood, Asian special food items, canned products, meat and poultry products, fresh produce products, packaging and other items including take-out accessories.
In terms of the trailing-12-month asset turnover ratio, HFFG’s 1.82x is 118.1% higher than the 0.84x industry average.
For the fiscal third quarter ended September 30, 2023, HFFG’s net revenue amounted to $281.45 million. Its income from operations came in at $2.08 million, compared to a loss from operations of $3.10 million in the prior-year quarter. Its adjusted EBITDA increased 151% year-over-year to $10 million.
Additionally, its non-GAAP net income attributable to HFFG stood at $5.02 million, compared to a non-GAAP net loss attributable to HFFG of $484 thousand in the prior-year quarter.
Over the past nine months, the stock has gained 41% to close the last trading session at $5.50.
HFFG’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, Stability, and Sentiment. It is ranked #11 in the same industry. To access the additional ratings of HFFG for Momentum and Quality, click here.
Stock #1: Ingredion Incorporated (INGR)
INGR produces and sells sweeteners, starches, nutrition ingredients, and biomaterial solutions derived from wet milling and processing corn and other starch-based materials to a range of industries worldwide. The company offers starch products, cornstarch, specialty paper starches, specialty starches for the textile industry, industrial starches and sweetener products.
On November 13,2023 INGR announced the signing of a definitive agreement to divest its business operations in South Korea to a subsidiary of the Sajo Group, a prominent food company headquartered in Seoul. The deal is set to finalize in Q1 2024, is subject to regulatory approval and standard closing conditions.
Jim Zallie, Ingredion’s President and CEO said, “As we look forward in our business transformation, we will take actions to sharpen our customer focus and pursue global growth opportunities. We believe this transaction is an example of putting our strategy into action to unlock value and redeploy assets in pursuit of our growth roadmap to create value for shareholders.”
In terms of the trailing-12-month EBIT margin, INGR’s 11.12% is 32% higher than the 8.43% industry average. Likewise, its 10.03% trailing-12-month Return on Total Capital is 44.9% higher than the industry average of 6.92%. Furthermore, the stock’s 4.01% trailing-12-month Capex/Sales is 24.2% higher than the industry average of 3.23%.
INGR’s net sales for the third quarter ended September 30, 2023, increased marginally year-over-year to $2.03 billion. Its non-GAAP operating income increased 14.7% year-over-year to $219 million. The company’s non-GAAP net income attributable to INGR increased 35.7% over the prior-year quarter to $156 million. Its adjusted EPS came in at $2.33, representing an increase of 34.7% year-over-year.
Analysts expect INGR’s revenue and EPS for the quarter ending December 31, 2023, to increase 5.2% and 12.1% year-over-year to $2.09 billion and $1.85, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive. The stock has gained 11.5% year-to-date to close the last trading session at $109.19.
It’s no surprise that INGR has an overall rating of B, which translates to a Buy in our POWR Ratings system.
It is ranked #6 in the Food Makers industry. It has an A grade for Sentiment and a B for Value and Stability. Click here to see INGR’s Growth, Momentum, and Quality ratings.
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INGR shares were trading at $108.64 per share on Wednesday afternoon, down $0.55 (-0.50%). Year-to-date, INGR has gained 13.38%, versus a 26.32% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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