Although rampant inflation has thinned Americans’ wallets over the past year, it has benefitted the food makers and retail sectors that have enjoyed high-profit margins from the rising prices. In this article, we take a closer look at three fundamentally sound food maker stocks, namely Danone S.A. (DANOY), Ingredion Incorporated (INGR), and SpartanNash Company (SPTN), to help you determine whether they are worth buying.
In the wake of the current market tantrums and changing consumer preferences, the food makers industry has shown resilience and stability due to the inelastic demand for its offerings. The global food market is already worth more than $9 trillion in 2023 and continues to expand at a healthy rate with the growing population.
Factors driving the growth include changing consumer preferences, the rise of e-commerce, and the increasing demand for healthier and more sustainable food products. Moreover, as online ordering, grocery delivery, and take-outs became the new norm, many customers turned to digital platforms to order food and groceries.
Furthermore, the U.S. packaged food market is growing due to increasing product innovation and packaging, changing lifestyles, and a growing trend toward plant-based and organic foods. The market is projected to reach $1.59 trillion by 2030, exhibiting a CAGR of 4.8%.
Food manufacturers are investing in automation to meet customers’ rising demand for processed items and lifestyle variations. Significant cash inflows toward embracing the Internet of Things (IoT), data analytics, robotics, and Artificial Intelligence (AI) indicate the food market’s significant potential.
In addition, food maker stocks are consumer staples and are also known as a hedge against economic slowdowns, which makes them a safe bet with remarkable returns on your investments.
Given this backdrop, we believe fundamentally sound dividend-paying food maker stocks DANOY, INGR, and SPTN are well-positioned to help you fetch stable and promising returns. To that end, let’s delve deep into the fundamentals of the featured stocks.
Danone S.A. (DANOY)
DANOY, headquartered in Paris, France, is a multinational food and beverage company. It operates through three segments: Essential Dairy & Plant-Based; Specialized Nutrition; and Waters. It produces and distributes yogurts; milk products; coffee creamers, beverages, and drinks; plant-based products; and ice creams, frozen desserts, and cheese products.
On May 11, the company paid its shareholders a dividend of €2.00 per share in cash. DANOY’s four-year average dividend yield is 3.46%, while its current dividend translates to a 3.54% yield on prevailing prices. Also, its dividend payout has grown at a 2.8% CAGR over the past five years.
In the same month, DANOY issued an €800 million ($872.38 million) bond with an eight-year maturity and a 3.47% coupon, in line with its active liquidity management strategy. This issue allows DANOY to enhance its funding flexibility while extending its debt maturity.
The bond issue received high interest from a diverse group of investors, which is a testament to the company’s robust business model and credit profile.
In the fiscal year 2022 (ended December 31), DANOY’s sales increased 13.9% year-over-year to €27.66 billion ($30.16 billion). Its recurring operating income and net income rose marginally from the year-ago value to €3.38 billion ($3.68 billion) and €2.21 billion ($2.40 billion), respectively. The company’s recurring EPS came in at €3.43, representing a 3.6% year-over-year increase.
Additionally, in the first quarter of 2023, the company reported consolidated sales of €6.96 billion ($7.59 billion), up 11.6% year-over-year and 10.5% on a Like-For-Like (LFL) basis. This performance was driven by all categories and geographies, notably the North America and CNAO zones.
Street expects DANOY’s revenues to increase 9.1% year-over-year to $7.87 billion in the fiscal second quarter (ended June 30, 2023). Its EPS is expected to increase by 3.3% per annum over the next five years. In addition, it topped the revenue estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 31.8% to close the last trading session at $12.35.
DANOY’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DANOY has an A grade for Stability and a B for Quality. Out of 81 stocks in the Food Makers industry, it is ranked #19.
To see additional POWR Ratings for Growth, Value, Momentum, and Sentiment for DANOY, click here.
Ingredion Incorporated (INGR)
INGR develops, produces, and sells sweeteners, starches, nutrition ingredients, and biomaterial solutions derived from wet milling and processing corn and other starch-based materials to a range of industries in North America, South America, the Asia Pacific, Europe, the Middle East, and Africa (EMEA). Its product lines include starches and sweeteners, animal feed products, and edible corn oil.
On March 19, backed by its strong financials, the company declared a quarterly dividend of $0.71 per share on the common stock, payable to its shareholders on July 25, 2023. INGR’s four-year average dividend yield is 2.93%, and its current dividend of $2.84 translates to a 2.67% yield on the current prices.
Its dividend payouts have grown at CAGRs of 4.1% and 3.4% over the past three and five years, respectively. Also, it has a record of 12 years of consecutive dividend growth.
In the first quarter that ended on March 31, 2023, INGR’s net sales increased 12.9% year-over-year to $2.14 billion. Its gross profit rose 28.5% from the prior-year quarter to $487 million. The company’s non-GAAP operating income and non-GAAP net income improved 38.9% and 42.4% from the year-ago values to $296 million and $188 million, respectively. Also, the company’s adjusted EPS came in at $2.80, up 43.6% year-over-year.
Looking at the company’s performance, President and CEO Jim Zallie raised the full-year 2023 adjusted EPS outlook to $8.70-$9.40, up from $7.70-$8.40.
He added, “Our updated full-year outlook reflects better price and customer mix management as well as our continued vigilance in managing costs. We anticipate customer demand will steadily strengthen throughout the second half following some sales volume softness in the first quarter, primarily due to slower consumer demand and customers’ rebalancing of inventories.”
Street expects INGR’s EPS and revenue to increase 9% and 7.3% year-over-year to $2.31 and $2.19 billion, respectively, for the fiscal second quarter (ended June 30, 2023). Moreover, it surpassed the EPS estimates in each of the trailing four quarters, which is excellent.
The stock has gained 30.3% over the past nine months to close the last trading session at $106.50.
It’s no surprise that INGR has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Sentiment and a B for Growth and Stability. It is ranked #17 of 81 stocks within the same industry.
In addition to the POWR Ratings we stated above, we also have INGR’s ratings for Value, Momentum, and Quality. Get all INGR ratings here.
SpartanNash Company (SPTN)
SPTN distributes and retails grocery products operating through two segments: Wholesale; and Retail. It also supplies private brand items under the ‘Our Family’ brand name. Its offerings include grocery and perishable food, bakery goods, frozen food, seafood, floral products, general merchandise, beverages, tobacco products, health and beauty care, and pharmacy products.
On June 30, the company paid its shareholders a quarterly dividend of $0.215 per common share. SPTN’s four-year average dividend yield is 3.96%, and its current dividend of $0.86 translates to a 3.75% yield on prevailing prices.
Its dividend payouts have grown at a 3.6% CAGR over the past three years and a 4.3% CAGR over the past five years. Also, it has a record of 12 years of consecutive dividend growth.
On May 10, SPTN announced the deployment of Simbe’s business intelligence solution, Tally, across 15 stores in Michigan and Indiana to generate real-time inventory insights. This expansion reflects the company’s continued investment in technology to enhance the store guest and Associate experience.
On January 5, SPTN acquired Great Lakes Foods, an independent grocery wholesaler, including its 300,000-square-foot distribution center in Menominee, Michigan. The addition of this new distribution center expands the company’s supply chain network and drives growth while serving its customers more efficiently.
SPTN’s net sales increased 5.2% year-over-year to $2.91 billion in the fiscal first quarter (ended April 22, 2023). During the same period, its adjusted operating amounted to $40.83 million, while its adjusted earnings from continuing operations stood at $22.86 million and $0.64 per share. Also, its adjusted EBITDA increased marginally from the year-ago value to $76.77 million.
The consensus EPS estimate of $0.59 for the fiscal third quarter (ending September 2023) represents a 7.8% improvement year-over-year. The consensus revenue estimate of $2.36 billion for the ongoing quarter represents a 2.9% increase from the same period last year. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 2.3% over the past month to close the last trading session at $22.96.
SPTN’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Growth and Value. In the same industry, it is ranked #18 among 81 stocks.
Click here to see the additional ratings for SPTN (Momentum, Stability, Sentiment, and Quality).
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DANOY shares were trading at $12.35 per share on Tuesday afternoon, up $0.06 (+0.49%). Year-to-date, DANOY has gained 20.56%, versus a 16.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta’s profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More…
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