The FAO Food Price Index (FFPI) averaged 130 points in September 2021, up 1.2% from August 2021 and 32.8% year-over-year. High fuel prices, bad weather, and COVID-19 pandemic-led supply chain issues contributed to the huge price rise.
Furthermore, the demand for environmentally-friendly food products is boosting the industry’s growth. According to a Market Research Future report, the Plant-Based Food Market is estimated to reach $37.98 billion by 2027, growing at a 10.2% CAGR. Investors’ interest in food stocks is evident in the Invesco Dynamic Food & Beverage ETF’s (PBJ) 3.3% returns over the past month.
So, we think it could be wise to bet now on quality food stocks Danone S.A. (DANOY), Sysco Corporation (SYY), Tyson Foods, Inc. (TSN), and Darling Ingredients Inc. (DAR). They are well-positioned to gain from the rising food prices.
Danone S.A. (DANOY)
Headquartered in France, DANOY operates in the food and beverage industry in Europe, North America, Latin America, the Asia Pacific, Africa, and the Middle East. The company operates through three segments: Essential Dairy & Plant-Based; Specialized Nutrition; and Waters.
On July 29, DANOY launched a share buyback program of up to €800 million ($930.81 million) worth of shares in the second half of 2021. As of October 15, 2021, the company had repurchased an aggregate market value of €673 million ($783.04 million) of stock. This activity reflects the company’s confidence.
DANOY’s EDP revenue increased 5.2% year-over-year to €3.27 billion ($3.8 billion) for its fiscal third quarter, ended September 30, 2021. Its revenue from Specialized Nutrition came in at €1.78 billion ($2.07 billion), representing a 4.6% year-over-year rise. And its total sales increased 5.8% year-over-year to €6.16 billion ($7.16 billion).
For its fiscal year 2022, analysts expect DANOY’s revenue to be $28.94 billion, representing a 4% year-over-year rise. The company’s EPS is expected to increase 11% year-over-year to $0.84 in fiscal 2022. Over the past year, the stock has gained 7.6% in price to close yesterday’s trading session at $13.14.
DANOY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has a B grade for Value, Stability, and Quality. Within the Food Makers industry, it is ranked #18 of 83 stocks. Click here to see the additional POWR Ratings for Growth, Sentiment, and Momentum for DANOY.
Sysco Corporation (SYY)
Operating through U.S. Foodservice Operations; International Foodservice Operations; SYGMA; and Other segments, SYY provides marketing and distribution of various food and related products. The Houston, Tex.-based company has 343 distribution facilities, and distributes frozen foods, canned and dry foods, fresh meats and seafood, dairy products, and beverage products.
On July 27, SYY announced its collaboration with SAVRpak to enrich fresh-food door-to-door delivery. Judy Sansone, SYY’s executive vice president and chief commercial officer, said, “We are very excited to offer SAVRpak to Sysco’s customers through the Cutting Edge Solutions platform.”
SYY’s sales were $16.10 billion for its fiscal fourth quarter, ended July 3, 2021, up 82% year-over-year. The company’s non-GAAP operating income came in at $605.18 million, versus $33.88 million loss in the prior year’s quarter. In comparison, its non-GAAP net earnings came in at $366.31 million compared to a $147.83 million loss in the year-ago period. Also, its non-GAAP EPS was t $0.71 compared to a $0.29 loss in the prior-year period.
For its fiscal year 2022, analysts expect SYY’s EPS and revenue to increase 143.8% and 24.1%, respectively, year-over-year to $3.51 and $63.66 billion. In addition, it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has soared 23.6% in price over the past year to close yesterday’s trading session at $79.82.
SYY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
Tyson Foods, Inc. (TSN)
Springdale, Ark.-based food company TSN operates through four segments: Beef, Pork, Chicken, and Prepared Foods. It is a modern, multi-national, protein-focused food company that produces approximately 20% of the beef, pork, and chicken in the United States.
On September 9, 2021, TSN launched its Hillshire Farm product SNACKED!, giving parents a versatile, on-the-go, quality snack pack made with trusted ingredients for kids. Noelle O’Mara, TSN’s Group President, said, “Hillshire Farm SNACKED! is an easy, portable and delicious snack that fits in with today’s parents’ and kids’ on-the-go lifestyle. As a leader in protein and snacking, we saw a clear opportunity for a versatile, great-tasting, kid-focused snack – and that’s exactly what Hillshire Farm SNACKED! delivers.”
TSN’s sales increased 24.5% year-over-year to $12.48 billion in the third quarter, ended July 3, 2021. Its gross profit came in at $1.62 billion, representing a 23.4% year-over-year rise. Its net income increased 42.4% year-over-year to $749 million, while its EPS came in at $2.05, representing a 42.4% year-over-year rise.
For its fiscal year 2021, TSN’s revenue and EPS are expected to grow 8.3% and 36.9%, respectively, year-over-year to $46.76 billion and $7.91. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 40.4% in price to close yesterday’s trading session at $81.23.
TSN’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
Darling Ingredients Inc. (DAR)
DAR develops, produces, and sells natural ingredients from edible and inedible bio-nutrients. The company operates through three segments: Feed Ingredients, Food Ingredients, and Fuel Ingredients. Dar is based in Irving, Tex.
On October 19, 2021, DAR’s health brand, Rousselot, launched Quali-Pure, a range of gelatins for biomedical applications with controlled endotoxin levels. Tanja Vervust, Director at Rousselot Biomedical, said, “It will give peace of mind to our customers who can rest assured knowing the quality, batch-to-batch consistency, and purity of our Quali-Pure gelatin range will contribute to overcoming the challenges they may face on the pathway to approval of their biomedical applications.”
For its fiscal second quarter, ended July 3, 2021, DAR’s net sales increased 41.2% year-over-year to $1.20 billion. The company’s operating income was $268.26 million, up 152.4% year-over-year. Its net income came in at $196.58 million, up 200.4% year-over-year. Also, its EPS increased 200% from the same period last year to $1.17.
DAR’s revenue is expected to come in at $4.62 billion in its fiscal year 2021, representing a 29.3% year-over-year rise. The company’s EPS is expected to increase 113.8% year-over-year to $4.19 in the current year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 73.4% to close yesterday’s trading session at $77.34.
DAR’s strong fundamentals are reflected in its POWR Ratings. The stock has a B grade for Growth and Quality. It is ranked #31 in the Food Makers industry. Click here to see the additional POWR Ratings for DAR (Value, Momentum, Stability, and Sentiment).
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DANOY shares were trading at $13.04 per share on Thursday afternoon, down $0.10 (-0.76%). Year-to-date, DANOY has gained 2.20%, versus a 22.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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