Forget Farmmi, Buy These 3 Packaged Food Stocks Instead

NYSE: FLO | Flowers Foods, Inc.  News, Ratings, and Charts

FLO – The pandemic-driven surge in demand for ready to cook and easy-to-eat food has given a boost to the packaged food industry, making the space highly competitive. And we don’t think Farmmi (FAMI) looks fundamentally fit enough to survive the competition and attract investors. Conversely, we think it could be worth betting on Flowers Foods (FLO), Sanderson (SAFM), and Herbalife Nutrition (HLF), which are better positioned to capitalize on the industry tailwinds. So, let’s pore over these names.

Advances in food processing techniques, improvements in delivery services, continuing remote lifestyles due to the pandemic, and a growing demand by consumers for ready-to-cook, easy-to-eat food are driving the growth of the packaged food industry. The global packaged food market is expected to reach $3.41 trillion by 2030, registering a 5.2% CAGR. The industry’s solid growth prospects have encouraged several new players to enter the market over the past year, making it more competitive.

Although the agricultural e-commerce and technology enterprise Farmmi, Inc.’s (FAMI) revenues increased 31% year-over-year to $17.79 million in its  last reported quarter, the stock has lost 74.1% in price over the past nine months and 70.7% over year-to-date. Furthermore,  FAMI has been volatile over the past 90 days. Thus, we think  FAMI may not be the right choice for cashing in on the industry tailwinds.

Instead, we think Flowers Foods, Inc. (FLO), Sanderson Farms, Inc. (SAFM), and Herbalife Nutrition Ltd. (HLF), which have performed better than FAMI over the past months and possess strong fundamentals, could be ideal bets to capitalize on the industry’s solid growth prospects.

Flowers Foods, Inc. (FLO)

Thomasville, Ga.-based FLO provides a wide range of bakery foods to retail and food service customers in the U.S. The company offers bread, buns, rolls, snack cakes, and tortillas through the company’s direct-store delivery (DSD) network. FLO also provides frozen bakery products and snack cakes nationally through customers’ warehouses. The company markets its products under Nature’s Own, Dave’s Killer Bread (DKB), Wonder, Canyon Bakehouse, Tastykake, Sunbeam Bread, Merita, European Bakers, Butternut, Bunny Bread, and Mrs. Freshley’s brand names.

For the second quarter, ended July 17, 2021, FLO’s sales came in at $1.02 billion. The company’s net income amounted to $56.36 million, and its EPS came in at $0.26 for the period. Also, its cash and cash equivalents came in at $292.27 million.

FLO’s revenue is expected to increase 1.6% year-over-year to $4.35 billion in its fiscal year 2022. The company has surpassed the consensus EPS in each of the trailing four quarters, and its  EPS is expected to grow 1.7% next year. The stock has climbed  12.2% in price over the past nine months and 11.8% year-to-date.

FLO’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. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

Also, the stock has a B grade for Value and Quality. We have also graded FLO for Stability, Sentiment, Momentum, and Growth. Click here to access all FLO’s ratings. FLO is ranked #13 of 80 stocks in the C-rated Food Makers industry.

Sanderson Farms, Inc. (SAFM)

SAFM is a vertically integrated poultry processing company that markets and distributes fresh, frozen, and prepared chicken products in the United States. The Laurel, Miss., company offers ice-packed, chill-packed, bulk-packed, and frozen chicken under the Sanderson Farms brand. In addition, SAFM provides prepared chicken products and consumer packaged partially cooked or marinated chicken items for distributors and food service establishments.

During its fiscal third quarter, ended July 31, 2021, SAFM’s net sales increased 41.4% year-over-year to $1.35 billion. The company’s operating income grew 439.8% from its year-ago value to $215.22 million. Its net income rose 402.2% from the prior-year quarter to $164.76 million. Also, the company’s EPS increased 398.6% year-over-year to $7.38.

SAFM’s revenue is expected to increase 31.3% year-over-year to $4.68 billion in its fiscal year 2021. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters, and its EPS is estimated to grow 1,434.6% in the current year. The stock has soared 46.7% in price over the past year.

SAFM’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Growth, and a B grade for Value and Quality.

In addition to the POWR Rating grades I have just highlighted, one can see SAFM’s ratings for Stability, Sentiment, and Momentum here. SAFM is ranked #10 in the Food Makers industry.

Herbalife Nutrition Ltd. (HLF)

HLF is a global nutrition company that offers weight management products, including meal replacement, protein shakes, drink mixes, weight loss enhancers, and healthy snacks. The George Town, Cayman Islands-based concern’s operating segments are based in six regions–North America; Mexico; South and Central America; EMEA; Asia Pacific, and China. In addition, HLF provides literature, promotional, and other materials, including start-up kits, sales tools, and educational materials.

This month, HLF launched plant-based protein instant soup in the U.S. and Puerto Rico. The company believes that through science-based innovation, HLF should be able to provide a whole-day convenient and protein-rich nutritious snack to the consumers.

During the third quarter, ended September 30, 2021, HLF’s net sales came in at $1.43 billion. The company’s net sales under the Asia Pacific region increased 10.6% year-over-year to $393.5 million. Also, its gross profit amounted to $1.13 billion, and its operating income was  $189.4 million during the period.

HLF’s $5.87 billion consensus revenue estimate for its  fiscal period ending December 2021 represents a 5.9%  increase year-over-year. Its EPS is expected to grow 29.3% in the current year. Furthermore,  the company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters.

It is no surprise that HLF has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Quality, and a B grade for Value.

Click here to see the additional POWR Ratings for HLF (Sentiment Stability, Momentum, and Growth). HLF is ranked #5 of 11 stocks in the B-rated Medical – Consumer Goods industry.

FLO shares were trading at $25.38 per share on Wednesday morning, down $0.14 (-0.55%). Year-to-date, FLO has gained 15.12%, versus a 25.94% rise in the benchmark S&P 500 index during the same period.

About the Author: Priyanka Mandal

Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...

More Resources for the Stocks in this Article

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