Food prices have been rising at a record rate, driven by disruptions caused by the Ukraine-Russia war and skyrocketing inflation rates. Because both Russia and Ukraine are major exporters of several food commodities, including wheat and corn, the continued war and economic sanctions imposed on the former have pushed up food prices globally.
The World Bank estimates a 37% year-over-year rise in food prices worldwide. And the USDA's Economic Research Service predicts a 4.5%-5% year-over-year rise in domestic food prices this year. With worsening supply chain disruptions and soaring inflation rates, food prices are expected to reach fresh highs in the coming months.
Given this backdrop, we think it could be wise to invest now in quality food stocks Tyson Foods, Inc. (TSN), Pilgrim's Pride Corporation (PPC), JBS S.A. (JBSAY), Sanderson Farms, Inc. (SAFM), and John B. Sanfilippo & Son, Inc. (JBSS).
Tyson Foods, Inc. (TSN)
TSN in Springdale, Ark., is a food company that operates through four segments: Beef; Pork; Chicken; and Prepared Foods. The company offers its products under its own brand and seven other brands: Jimmy Dean, Hillshire Farm, Ball Park, Wright, State Fair, Aidells, and Gallo Salame.
On February 2, TSN was ranked no.1 on Fortune's World's Most Admired Companies list in the Food Production category for the sixth consecutive year. This reflects the company's consistent excellence in its work.
The company invested $355 million in a bacon production facility in Bowling Green, Ky., on the same day. With this expansion, TSN should continue to meet the growing demand for iconic Wright and Jimmy Dean brands.
TSN's sales increased 23.6% year-over-year to $12.93 billion in its fiscal first quarter (ended December 31). Its net income grew 140% from the year-ago value to $1.12 billion, while its adjusted operating income rose 40% year-over-year to $1.43 billion. The company's adjusted EPS increased 48% from its year-ago value to $2.87.
The $1.85 consensus EPS estimate for its fiscal second quarter (ended March 31, 2022) represents a 38.4% improvement year-over-year. The $12.87 billion consensus revenue estimate for the about-to-be-reported quarter indicates a 13.9% increase from the same period last year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 25.3% in price to close its last trading day at $98.40.
TSN's POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Value and a B grade for Growth and Sentiment. Among the 86 stocks in the Food Makers industry, it is ranked #8. Click here to see the additional POWR ratings of TSN for Momentum, Quality, and Stability.
Pilgrim's Pride Corporation (PPC)
PPC is engaged in producing, processing, marketing, and distributing fresh, frozen, and value-added chicken and pork products to retailers, distributors, and foodservice operators. Its geographic segments include the United States, United Kingdom, Europe, and Mexico. The Greeley, Colo. company offers its products under its own brand and other brands, which include: Just BARE, Gold'n Pump, Gold Kist, Pierce Chicken, Moy Park, O'Kane, Fridge Raiders, and Denny.
In its fiscal fourth quarter (ended Dec. 26, 2021), PCC's net sales increased 29.5% year-over-year to $4.04 billion. Its operating income increased 39.4% from its year-ago value to $55.05 million, while its adjusted EBITDA grew 54.2% year-over-year to $316.66 million. The company's EPS came in at $0.15, representing a 100% year-over-year improvement.
Analysts expect PPC's EPS and revenue to increase 61.1% and 25.2%, respectively, year-over-year to $0.68 and $4.10 billion in its fiscal first quarter (ended March 31, 2022). PPC has surpassed the consensus EPS estimates in each of the trailing four quarters.
PPC stock has gained 14.6% in price over the past year.
PPC's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. PPC also has a B grade for Growth and Stability. The stock is ranked #18 of 86 stocks in the Food Makers industry.
Click here to see the other ratings of PPC for Value, Momentum, Sentiment, and Quality.
JBS S.A. (JBSAY)
Headquartered in Sao Paulo, Brazil, JBSAY is a meat-processing company that operates through five segments: Brazil; Seara; JBS USA Beef; JBS USA Pork; and PPC. It offers beef, pork, chicken, and lamb products and by-products; food products; pet food and concentrates; and bresaola.
On March 18, JBSAY announced that the company would produce organic fertilizer using waste from its own facilities to support its farmers amid the looming fertilizer crisis. Its Guaicara unit in Sao Paulo will manufacture 150,000 tonnes of fertilizer products per year. With this initiative, JBSAY could become the first Brazilian food producer to use waste generated from its own operations to manufacture fertilizer.
JBSAY's net revenues increased 27.8% year-over-year to R$97.19 billion ($20.90 billion) in the fourth quarter ended Dec. 31, 2021. The company's net income increased 61% from its year-ago value to R$6.47 billion ($1.39 billion), while its adjusted EBITDA grew 86.9% year-over-year to R$13.15 billion ($2.83 billion). JBSAY's EPS rose 75.8% from the prior-year quarter to R$2.69.
For its fiscal first quarter (ended March 31, 2022), JBSAY's revenue is expected to increase 32.4% year-over-year to $18.79 billion. The stock surpassed the consensus EPS estimates in each of the trailing four quarters.
JBSAY stock has gained 32.5% in price over the past year to close yesterday's trading session at $16.69.
The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. It is no surprise that JBSAY has an A grade for Growth, Value, and Sentiment and a B grade for Stability. In the Food Makers industry, it is ranked #1 of 86 stocks.
Beyond what we have stated above, we have also given JBSAY grades for Momentum and Quality. Get all the JBSAY ratings here.
Sanderson Farms, Inc. (SAFM)
SAFM in Laurel, Miss., is an integrated poultry processing company that produces, processes, and distributes fresh, frozen, and prepared chicken products. It offers ice-packed, chill-packed, bulk-packed, and frozen chicken under its own brand name to retailers, distributors, and casual dining operators in the United States and customers who resell frozen chicken into export markets.
On March 29, SAFM's feed mill was named Integrator Feed Facility of the Year by the American Feed Industry Association, Feedstuffs, and the U.S. Poultry & Egg Association. Such recognition reflects the company's quality of work.
During its fiscal first quarter (ended Jan. 31, 2022), SAFM's net sales increased 46% year-over-year to $1.33 billion. Its operating income rose 1,794.9% from its year-ago value to $253.64 million. Its net income grew 1,934.3% from the same period last year to $192.81 million, while its EPS came in at $8.64, representing a 1,957.1% increase year-over-year.
Analysts expect SAFM's revenues to increase 25.4% year-over-year to $1.42 billion in its fiscal second quarter (ending April 30, 2022). Its EPS is expected to increase 75.8% to $7.63 in the current quarter. It is no surprise that the company has surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 17.2% in price to close the last trading session at $190.83.
SAFM's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. SAFM also has an A grade for Growth and a B grade for Value and Quality. The stock is ranked #3 of 86 stocks in the Food Makers industry.
Click here to see the other ratings of SAFM for Stability, Sentiment, and Momentum.
John B. Sanfilippo & Son, Inc. (JBSS)
JBSS is an Elgin, Ill.-based processor and distributor of nut and dried fruit-based products. It offers raw, processed nuts and snack products. The company's products are sold under five brands: Fisher; Orchard Valley Harvest; Squirrel Brand; Southern Style Nuts; and Sunshine Country.
JBSS's net sales increased 8.4% year-over-year to $253.21 million in the second quarter, ended Dec. 23, 2021, attributable to a 6% increase in sales volume.
For its fiscal third quarter, ending March 31, 2022, JBSS' revenue is expected to increase 3.7% year-over-year to $215.50 million. Shares of JNSS have gained 4.7% in price over the past month to close yesterday's trading session at $86.36.
JBSS has an overall B rating, which translates to Buy in our proprietary rating system. It also has a B grade for Value, Stability, and Sentiment. The stock is ranked #11 of 86 stocks in the Food Makers industry.
Click here to see the other ratings of JBSS for Growth, Momentum, and Quality.
TSN shares were trading at $99.11 per share on Thursday morning, up $0.71 (+0.72%). Year-to-date, TSN has gained 14.27%, versus a -5.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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