Tag: Inc. (TSN)

Recession-Proof Your Portfolio With Top Stocks to Buy Now

Posted on by The INO.com Team

Amid economic headlines of slowing growth and persistent inflationary pressures, navigating the financial markets can feel like steering through turbulent waters. According to Commerce Department estimates, U.S. Gross Domestic Product (GDP) slowed to an annual rate of 1.3% in the first quarter of 2024, decelerating from a brisk 3.4% growth rate observed in late 2023. This underscores a shift from robust expansion to more tempered economic activity.

Despite this slowdown, the Consumer Price Index (CPI) increased 3.3% in May compared to a year ago, slightly lower than April's 3.4%. While this marks a decline from the pandemic-era peak of 9.1% in 2022, it remains above policymakers' target of around 2%.

The investment landscape grows increasingly complex as the Federal Reserve grapples with taming inflation through successive interest rate hikes. In this climate, the quest for recession-proof investments becomes paramount for risk-averse investors to safeguard their portfolios against economic downturns.

Historically known for their resilience during economic downturns, food makers are increasingly sought after. These stocks encompass essential goods such as packaged food products, beverages, and household staples that consumers prioritize consistently, even during lean times.

In this article, I have highlighted three top food maker stocks, General Mills, Inc. (GIS), Tyson Foods, Inc. (TSN), and Campbell Soup Company (CPB), to consider investing if you are looking to recession-proof your portfolios. So, let’s dig deeper into these stocks' fundamentals and growth prospects.

General Mills, Inc. (GIS)

Food maker General Mills, Inc. (GIS) has been a household name for decades, with a lineup of beloved brands that span everything from cereals to snacks, yogurt, baking products, and even pet foods. You must have probably grown up with their iconic brands like Cheerios, Haagen-Dazs, Betty Crocker, and Yoplait.

In the third quarter earnings report, GIS demonstrated growth on both the top and bottom lines, navigating through moderating inflation, stabilized supply chains, and a cautious yet resilient consumer base.

For the fiscal 2024 third quarter that ended February 25, 2024, GIS’ net sales amounted to $5.09 billion, beating the analysts’ expectations of $4.97 billion. Its adjusted gross margin grew 13.2% from the year-ago value to $914.50 million.

Moreover, adjusted net earnings attributable to GIS increased 15.9% year-over-year to $674 million, while adjusted EPS stood at $1.17, up 1.8% from the prior year’s quarter. The company even exceeded the consensus earnings estimate by $0.12.

Looking ahead, Wall Street anticipates GIS to post earnings per share of $1.00 for the fourth quarter (ended May 2024), down 10.8% from last year’s quarter. The company is expected to generate $4.87 billion in revenue for the same period, reflecting a 3.1% year-over-year decline.

However, given General Mills' track record of beating earnings estimates in each of the trailing four quarters, there's a lot of optimism that it might once again exceed expectations in the forthcoming quarterly announcement.

General Mills is preparing for the rest of fiscal 2024 with an eye on the economic health of consumers, the slowing pace of inflation, and the increasing stability of supply chains. The company forecasts organic net sales to be flat or slightly down by 1%. Yet, it remains confident, projecting a 4% to 5% increase in adjusted operating profit and adjusted EPS in constant currency.

Regarding rewarding shareholders, General Mills offers a stable dividend with a four-year average yield of 3.13% and a payout ratio of 49.9%. GIS’ current annual dividend of $2.36 translates to a 3.61% yield at the prevailing share price. Moreover, the company has increased its dividend payouts at a CAGR of 5.3% over the past three years.

Despite the positive earnings report, GIS shares have declined nearly 20% over the past year and more than 7% over the past month. Yet, the stock has managed to eke out marginal gains year-to-date, reflecting a resilient performance amidst broader market challenges.

Tyson Foods, Inc. (TSN)

Tyson Foods, Inc. (TSN) is renowned for its leadership in protein and a lineup of household brands, including Tyson, Jimmy Dean, Hillshire Farm, and Ball Park. The company released its half-yearly results on May 6, exhibiting its resilience and growth in a competitive market.

During the fiscal second quarter (ended March 30, 2024), TSN's sales amounted to $13.07 billion, slightly below the year-ago value of $13.13 billion. However, its attributable non-GAAP net income amounted to $220 million compared to the prior year’s adjusted net loss of $12 million.

Likewise, the company’s adjusted operating income improved substantially from the prior year’s quarter to $406 million. The company's non-GAAP EPS came in at $0.62 (comfortably beating the Street’s estimate of $0.40) versus a loss per share of $0.04 a year ago.

The consensus EPS estimate of $0.62 for its fiscal third quarter (ending June 2024) represents a 315.3% improvement year-over-year. The consensus revenue estimate of $13.17 billion for the current quarter indicates a marginal increase year-over-year. Moreover, Tyson Foods has an excellent earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.

Benefiting from robust free cash flows totaling $556 million in the first half of the year, Tyson Foods announced a quarterly dividend of $0.49 per share on Class A common stock and $0.441 per share on Class B common stock, payable on September 13, 2024.

TSN’s four-year average dividend yield is 2.80%, and its forward annual dividend of $1.96 translates to a 3.58% yield. Tyson Foods has increased its dividend for 12 consecutive years, reflecting its commitment to returning value to investors. Additionally, its dividend payouts have grown at a 3.6% CAGR over the past three years and a 6.5% CAGR over the past five years.

Looking ahead to fiscal 2024, Tyson Foods expects total adjusted operating income to range between $1.4 billion and $1.8 billion, with sales projected to remain relatively flat compared to fiscal 2023. Despite market fluctuations, TSN stock has shown resilience, gaining over 8% over the past six months and nearly 2% year-to-date.

Campbell Soup Company (CPB)

Campbell Soup Company (CPB) is a staple in American kitchens, famous for its iconic soups and a wide variety of products, including snacks, beverages, and packaged fresh foods. The company owns popular brands like Pepperidge Farm, V8, and Snyder’s-Lance, which many of us have grown up with. It primarily operates through two segments: Meals & Beverages and Snacks.

In its latest earnings report, the company exceeded analysts' expectations on top and bottom lines. For the fiscal third quarter ending April 28, 2024, CPB’s net sales increased 6.3% year-over-year to $2.37 billion, partly thanks to its acquisition of Sovos Brands.

Furthermore, the company’s adjusted EBIT and non-GAAP attributable net earnings increased 13.1% and 9.8% from the year-ago values to $354 million and $224 million, respectively. Also, its adjusted EPS came in at $0.75, representing a 10.3% increase from the prior year’s quarter.

Analysts expect CPB’s revenue to increase 12.4% year-over-year to $2.32 billion in the fiscal fourth quarter (ending July 2024). In addition, its EPS is projected to register a year-over-year growth of 23.9%, settling at $0.62. Moreover, it surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.

On May 13, Campbell announced a quarterly dividend of $0.37 per share on May 13, payable to its shareholders on July 29, 2024. With a four-year average dividend yield of 3.17%, the current annual dividend of $1.48 translates to a 3.46% yield. Over the past five years, Campbell’s has shown a commitment to returning value to its investors, with dividend payouts growing at a CAGR of 7.1%

Despite an upbeat earnings report, the shares of the food company have tumbled more than 6% over the past month, though it has seen a slight uptick over the past nine months. Further, the company has adjusted its full-year 2024 guidance to reflect the impact of the Sovos acquisition, forecasting net sales growth of 3-4% and organic sales tracking to approximately flat to down 1%. Adjusted EPS is expected to increase by 2-3%, between $3.07 and $3.10.

Overall, Campbell continues to be a resilient player in the food industry, adapting and growing despite market fluctuations and economic challenges.

Bottom Line

Food maker stocks are historically resilient during economic slowdowns due to the inelastic nature of their products. When economic uncertainty rises, consumers prioritize spending on necessities, such as food, over discretionary items.

Packaged foods, beverages, and other household staples become even more crucial as they offer convenience and affordability, making them a go-to choice for families tightening their budgets. So, consistent demand for packaged food companies, irrespective of economic conditions, underscores their defensive nature, providing a safe haven for risk-averse investors looking to safeguard their portfolios against economic downturns.

Given their essential products, strong brand loyalty, and consistent financial performance, packaged food stocks like GIS, TSN, and CPB offer enhanced stability and growth potential, making them attractive buys for investors looking to recession-proof their portfolios.

Record Chicken Prices and Factory Disruptions – What's Next for Tyson Foods (TSN) Stock?

Posted on by The INO.com Team

Since the COVID-19 pandemic, Arkansas-based protein-focused food company Tyson Foods, Inc. (TSN) has faced difficulties, grappling with record-high cattle costs and elevated animal feed prices.

U.S. consumers are struggling with unprecedentedly high chicken prices at their local supermarkets, a trend expected to persist as TSN and its competitors scale back poultry production to improve profitability. Last year, TSN shuttered its processing facility in Van Buren, Arkansas, resulting in nearly 1,000 job losses.

The firm's cost-cutting measures impacted even more workers this year with the announcement to close six domestic chicken plants, affecting approximately 4,700 employees. The scheduled closure dates for these facilities are projected between late 2023 and early 2024.

Also, due to cost-effectiveness, inflation-affected consumers opt for chicken over beef and pork. This change in consumer patterns keeps chicken prices high, with indications pointing toward a persistent upward trend.

According to data from the U.S. Department of Agriculture, the U.S. per capita chicken consumption is likely to surpass 100 pounds for the first time this year. Simultaneously, the nation's beef consumption is predicted to slump to its lowest since 2018, owing to escalating prices and declining cattle supplies. Similarly, decreased consumer spending has pushed pork consumption to its lowest since 2015.

Let’s now understand the probable implications of escalating chicken prices.

Bull Cases

The monthly U.S. Department of Agriculture data unveils that retail prices in August for whole fresh chickens and bone-in legs reached nominal records. Drumstick prices rose 10%.

Given the strong consumer demand for chicken, the price rise may be impacted further due to production cuts. Government data has indicated a 2.8% decrease in eggs placed in U.S. incubator facilities in the six weeks leading up to September 23, compared to the same period last year – a clear contrast to the 2022 trend, which saw a 3.6% uptick.

Furthermore, there has been an approximately 2.7% reduction in chicks allocated for meat production from the prior year, which had seen a bounce of 4.5%. This strategic cutback has positively influenced the chicken market. TSN could capitalize on the record-high prices by transferring the inflated costs onto consumers. In addition, with corn prices at a three-year low, reduced feed costs could improve margins for producers.

Simultaneously, companies have been reducing bird weight to restrict production and regain profitability. This strategy inevitably means less meat is available for consumers.

Experts predict that after two quarters of running at a loss, TSN's chicken division should see a return to profit by the end of the quarter ending September 30. The current tightening of supplies should boost producers' profit margins.

For the fiscal year ending September 2023, TSN’s revenue is expected to grow marginally year-over-year to $53.36 billion, while EPS is expected to come at $1.18.

Bear Cases

The inflation-hit consumers have been shifting their preferences toward more affordable food items. This could potentially diminish the demand for chicken products. Consequently, TSN, a company significantly dependent on poultry sales as its primary business, may experience a slump in sales and revenue.

Moreover, the highly pathogenic avian influenza or "bird flu" outbreak, which resulted in approximately 58 million bird deaths over the year, could further implicate the need for chicken among consumers, adding to the declining demand. Concerns regarding avian welfare and heightened precautionary measures could increase production costs for meat producers.

The soaring inflation has forced TSN to contend with increased feed, transport, and processing expenses. This surge threatens to erode the profit margins of the meat producer, thereby significantly challenging its ability to compete with other industry players.

The chicken plant closure is feared to have a ripple effect through the agricultural ecosystem, directly impacting nearly 29 local farmers supplying chicken and grain producers responsible for chicken feed in Dexter. The impending shutdowns could affect approximately 300 plant workers in North Little Rock and over 500 jobs in Corydon, Indiana. About 1,500 individuals employed at the Noel facility, Missouri, would be heavily impacted.

TSN had encountered difficulties in hatching birds and staffing processing lines amid an unexpected surge in demand for chicken post-pandemic. The company now grapples with surplus stock as poultry demand remains flat and wholesale prices have experienced a dip. TSN's attempt to increase production has been ill-advised.

TSN has announced a significant loss of $198 million for the nine months that ended July 1, 2023. This is reportedly the meat producer’s most substantial loss over a nine-month period since 2009. Its chicken division reported an operating loss of $503 million for the same period.

Bottom Line

TSN’s chicken business is responsible for one-fifth of the U.S. market supply. Coupled with the abovementioned factors, the company is experiencing heightened competitive pressure from plant-based meat substitute companies. These alternatives are trending among consumers who seek healthier and eco-friendly dietary options.

Adding to TSN's challenges, there is an ongoing investigation by the Department of Labor into allegations that migrant children were employed at its facilities. Should these accusations prove accurate, the company could face substantial legal jeopardy and potential damage to its reputation.

With TSN's weak financial health, there have been amplified concerns regarding its valuation. The stock currently trades at a forward non-GAAP P/E multiple of 40.05, 136.5% higher than the industry average of 16.45.

Considering these circumstances, investors could exercise caution when making a decision to invest in the stock.

3 Food Stocks to Buy Instead of Beyond Meat (BYND)

Posted on by The INO.com Team

For the stock of Beyond Meat, Inc. (BYND), seemingly on a one-way descent, its high of $186.83 on January 26, 2021, seems like a distant memory. The precipitous decline in the company’s stock price has reflected the alarming decline in its top line, which is more than the category average due to the inflation-led slowdown.

Founded in 2009 by its CEO Ethan Brown, BYND targeted meat eaters with plant-based products that replicate animal meat in look, feel, and taste. The company partnered with grocery and restaurant chains to increase the reach and visibility of its products.

In the interest of sustainability, which of the following options would you prefer?

  • Consuming regular quantities of plant-based meat
  • Consuming animal protein in moderation and on occasions

The hype surrounding the brand, further accentuated by big-name celebrity endorsements, helped the company’s stock make a strong market debut in 2019.

However, the company’s single-minded pursuit of growth and expansion through innovative offerings came in lieu of mounting debt and cost overruns.

Moreover, the company’s tendency to overpromise and underdeliver also didn’t help. As a result, the company had to switch its priority from growth at any cost to sustainable growth with healthy cash flows.

However, this attempt to scale down while moving forward has resulted in revenue decline, loss of market share to competitors, and a consequent slump in share price.

While BYND deals with its struggles and charts an arduous path to profitability, here are some alternative food stocks to consider.

Nestlé S.A. (NSRGY) is a global nutrition, health, and wellness company. The company’s segments include Europe, the Middle East, and North Africa (EMENA); Americas (AMS); Asia, Oceania, and sub-Saharan Africa (AOA); Nestle Waters; Nestle Nutrition; and Other Businesses.

NSRGY's offerings include powdered and liquid beverages; water; milk products, and ice cream; nutrition and health science; prepared dishes and cooking aids; confectionery; and PetCare.

In 2017 NSRGY acquired Sweet Earth, a Calif.-based vegan foods manufacturer. In 2019, Sweet Earth announced the launch of its new vegan burger product, Awesome Burger, and its ground beef component, Awesome Grounds. Both products are currently distributed to supermarkets, restaurants, and universities.

For the fiscal year 2022, NSRGY’s total reported sales increased by 8.4% to CHF 94.4 billion ($104.66 billion), with organic growth coming in at 8.3% year-over-year. The company’s underlying EPS increased by 8.4% to CHF 3.42 during the same period.

For the first three months of 2023, NSRGY’s total reported sales increased by 5.6% year-over-year to CHF 23.5 billion ($26.05 billion). Organic growth came in at 9.3%, while acquisitions had a net positive impact of 0.3%.

Hormel Foods Corporation (HRL)develops, processes, and distributes a range of branded food products globally. The company operates through three segments: Retail, Foodservice, and International.

Back in 2019, HRL forayed into products that reduced meat consumption with its “Fuse Burger,” made from ground turkey and rice.

Despite a challenging start to the fiscal year 2023, persistent impact from inflationary pressures, supply chain inefficiencies, and lower-than-expected sales volumes, HRL’s sales and operating income for the first quarter came in at $3 billion and $289 million, respectively. The company’s diluted EPS came in at $0.40.

Tyson Foods, Inc. (TSN) is a protein-focused food company whose segments include: Beef; Pork; Chicken; and Prepared Foods.

In 2019, the company launched its line of meat-free and blended protein products called Raised & Rooted. After starting with nuggets made from a blend of pea protein powder and other plant ingredients, the brand diversified into blended burgers made with a combination of plant-based ingredients and Angus beef.

For the second quarter of fiscal year 2023, TSN’s sales demonstrated a marginal increase to $13.13 billion. On May 11, the company declared a quarterly dividend of $0.48 and $0.432 per share on its Class A and Class B common stock, respectively. The dividends would be paid out on September 15, 2023, to shareholders of record at the close of business on September 1, 2023.