The share price of popular plant-based meat producer Beyond Meat, Inc. (BYND) has declined 8.8% over the past month, and 9% over the past five days. CFRA analyst Arun Sundaram downgraded the stock recently because he expects the company to report higher losses in the coming quarters. Given the company’s weak growth potential, it looks overvalued at its current price level. In fact, BYND’s 15.48x forward Price/Sales is 881.2% higher than the 3.31x industry average. Consequently, Wall Street analysts expect shares of BYND to decline 13.9% in the near-term.
However, despite rising food prices, the demand for packaged food is expected to remain strong during the economic recovery period. Indeed, the global processed food market is expected to grow at 3.9% CAGR to reach $7.72 billion by 2026.
Given this backdrop, we believe fundamentally sound packaged food stocks Ingredion Incorporated (INGR), Herbalife Nutrition Ltd. (HLF), and Pilgrim’s Pride Corporation (PPC) are well-positioned to outperform BYND in the near term.
Ingredion Incorporated (INGR)
INGR produces and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from processing corn and other starch-based materials. The company serves the food, soft drink, brewing, pharmaceutical, paper and corrugating, and textile industries. It has company-owned operations, joint ventures, alliances, and technical licenses worldwide. INGR is based in Westchester, Ill.
On May 17, 2021, Univar B.V., a subsidiary of the chemical and ingredient distributor Univar Solutions Inc. (UNVR), agreed with INGR to distribute INGR’s PureCircle portfolio of plant-based stevia products in select countries across Europe. Bringing together UNVR’s expertise and knowledge as a distributor with PureCircle’s innovative products, integrated supply chain and application expertise should help the companies deliver market-leading food and beverage solutions.
Also in May, Amyris, Inc. (AMRS), a synthetic biotechnology and renewable chemical company, signed an agreement with INGR to manufacture and exclusively license AMRS’ zero-calorie, nature-based, fermented Reb M sweetener, and other types of fermentation-based food ingredients. INGR will also hold a minority ownership stake in AMRS’ Brazilian factory, which is now under-construction. Both developments should enable INGR and other companies to capitalize on the growing demand for natural, sustainably sourced, ingredients.
INGR’s net sales for its fiscal first quarter, ended March 31, 2021, increased 4.6% year-over-year to $1.61 billion. The company’s gross profit has been reported at $351 million, up 8.7% from the prior-year period. Its non-GAAP operating income came in at $201 million, which represents a 20.4% year-over-year improvement. While its non-GAAP net income increased 16.7% year-over-year to $126 million, its non-GAAP EPS increased 16.4% year-over-year to $1.85. The company had $576 million in cash and cash equivalents as of March 31, 2021.
INGR surpassed consensus EPS estimates in three of the trailing four quarters. The $1.65 billion consensus revenue estimate for the current quarter represents a 12.3% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 1.9% rate per annum over the next five years. The stock has gained 20.8% over the past nine months and closed yesterday’s trading session at $92.06.
INGR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Herbalife Nutrition Ltd. (HLF)
HLF is a nutrition company that manufactures and sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, and personal care products worldwide. The company offers its products through independent service providers and sales representatives, as well as through company-operated retail platforms. HLF is based in George Town, the Cayman Islands.
Last month, HLF expanded its skincare line with the launch of Herbalife SKIN LycoGlow. Formulated with Lycored Nutrient Complex for Skin, its plant-based ingredients help nourish the skin with nutrients and antioxidants and is designed to complement a holistic skincare routine. Its ability to balance the skin’s response to sun exposure and environmental stresses should generate good sales this summer.
For its fiscal first quarter, ended March 31, 2021, HLF’s net sales increased 18.9% year-over-year to $1.50 billion. The company’s gross profit has been reported at $1.19 billion, which represents a 16.8% year-over-year improvement. Its operating income came in at $222.50 million, up 132.7% from the prior-year period. HLF’s adjusted net income has been reported at $157.80 million, which represents a 28.1% year-over-year improvement. HLF’s adjusted EPS increased 61.4% year-over-year to $1.42. As of March 31, 2021, the company had $611.70 million in cash and cash equivalents.
Analysts expect HLF’s EPS to improve 6.1% year-over-year for the current quarter, ending September 30, 2021, to $1.22. The stock surpassed the Street’s EPS estimates in three of the trailing four quarters. Its revenue is estimated to be $1.59 billion for the current quarter, representing a 4.6% rise year-over-year. The stock has gained 17.4% over the past year and ended yesterday’s trading session at $52.47.
HLF’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has an A grade for Quality, and a B grade for Growth and Value. We have also graded HLF for Stability, Sentiment, and Momentum. HLF is ranked #3 of 10 stocks in the B-rated Medical – Consumer Goods industry. Click here to access all HLF ratings.
Pilgrim’s Pride Corporation (PPC)
As a subsidiary of JBS S.A., a Brazilian meat processing company, PPC is engaged in the production, processing, marketing and distribution of fresh, frozen, and value-added chicken and pork products to retailers, distributors and foodservice operators internationally.
Last month, Greeley, Colo.-based PPC acquired the Meats and Meals business of Kerry Consumer Foods in the U.K. and Ireland for $952 million. The acquisition provides PPC further penetration into the prepared and branded products segment and will also enable it to develop new and innovative products through the businesses’ combined expertise to support our key customers’ growth objectives.
PPC’s net sales for its fiscal first quarter, ended March 28, 2021, increased 6.5% year-over-year to $3.27 billion. The company’s gross profit came in at $261.24 million, up 47.5% from the prior-year period. Its operating income has been reported at $158.46 million, which represents an 87.8% year-over-year improvement. PPC’s adjusted net income has been reported at $103.05 million for the quarter, which represents a 256.4% rise from the prior-year period. And its adjusted EPS increased 250% year-over-year to $0.42. The company had $367.02 million in cash and cash equivalents, as of March 28, 2021.
For the current quarter, ending September 30, 2021, analysts expect PPC’s revenue to be $3.34 billion, representing an 8.6% rise from the prior-year period. The stock’s EPS is expected to grow at a 27.8% rate per annum over the next five years. PPC has gained 36.3% over the past nine months to end yesterday’s trading session at $21.43.
It’s no surprise that PPC has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock has an A grade for Stability and Growth, and a B grade for Value. PPC is ranked #6 in the B-rated Food Makers industry. Click here to see the additional ratings for PPC (Quality, Sentiment, and Momentum).
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INGR shares were trading at $93.90 per share on Friday afternoon, up $1.84 (+2.00%). Year-to-date, INGR has gained 21.05%, versus a 17.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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