Food prices have soared 30% since 2019. And shares of many at-home food-related stocks are jumping this year, too. But don't blame gouging and corporate greed, says a new analyst report.
Shares of Walmart and Kroger are among nine S&P 500 food-related stocks up more than 21% this year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge. That's a strong showing as the S&P 500 is up just 19.9%.
But the rally is due to strong demand, not "corporate greed," said Arun Sundaram, analyst at CFRA.
"While food prices have risen by about 30% since 2019, costs have also increased substantially during this period. Therefore, the key metric to focus on is gross margins, which have remained stable relative to pre-pandemic levels," Sundaram said. "Moreover, the producer price index has tracked closely with the consumer price index, indicating that the price hikes on the shelves are cost-justified price increases."
Head-Turning Food Price Inflation
Some of the jumps in food prices are staggering. The price of meats and eggs are up 30% from 2019, CFRA found. And nonalcoholic drink prices are up 29%.
But it's not just food at home prices that have jumped. Food away from home, such as restaurants, upped prices 29% since 2019.
Despite soaring prices, though, the amount of money food companies keep in profit after paying costs are stable, CFRA found. Margins at General Mills, Procter & Gamble and Hershey are all in-line with where they were in 2019.
And those aren't the companies where most of the stock gains are. Shares of General Mills are up just 13.9% this year. The RS Rating is a modest 69. And next year, analysts only think earnings growth will be flat.
Food Retail Is Where The Action Is
Walmart and Kroger are attracting more of investors' interest. Shares of Kroger are up nearly 23% this year.
But again, gross margins at Kroger are fairly stable. "Nonetheless, we believe Kroger's margin trends over the past few years do not suggest excessive pricing," CFRA's Sundaram said. The stock's RS Rating is just 72 and Composite Rating is 78.
Investors, though, are most bullish on Walmart. The retailer has become the grocery store for many Americans. Shares of Walmart are up more than 52% this year. That makes them the top performing of the at-home food related stocks in the S&P 500.
And to that point, CFRA has a buy rating on both Walmart and Kroger. "These big-box retailers are well positioned in the current environment, as the cost of dining out is often more than four times higher than a meal at home," CFRA said.
Top At-Home Food-Related S&P 500 Stocks
This year so far
| Company | Ticker | YTD % ch. |
|---|---|---|
| Walmart | WMT | 52.9% |
| Kellanova | K | 44.2% |
| Costco Wholesale | COST | 38.9% |
| Philip Morris International | PM | 28.7% |
| Altria Group | MO | 26.5% |
| Kroger | KR | 22.8% |
| Coca-Cola | KO | 21.7% |
| McCormick | MKC | 21.6% |
