Deepening supply chain disruptions and rising energy, transportation, and labor costs should drive packaged food prices higher in the coming months. However, with extended hybrid lifestyles, the demand for packaged food products is expected to remain high, helping companies in the sector to pass their rising input costs to their customers.
In addition, with an apparent uptrend in employment, U.S. consumer confidence unexpectedly edged up in March despite inflation concerns. According to Research and Markets, the global packaged food market is expected to grow at a 6.3% CAGR to more than $4261.36 billion by 2026.
Therefore, we think quality packaged food stocks General Mills, Inc. (GIS) and Darling Ingredients Inc. (DAR) could be ideal bets to battle high inflation.
General Mills, Inc. (GIS)
GIS manufactures and markets branded consumer foods worldwide. The Minneapolis, Minn., company operates in five segments: North America Retail; Convenience Stores & Foodservice; Europe & Australia; Asia & Latin America; and Pet.
On March 23, 2022, GIS’ Chairman and CEO, Jeff Harmening, said, “demand for our brands remains robust, and our team has shown great agility to overcome disruptions throughout the supply chain and deliver for our customers and consumers. We expect to drive strong growth in the fourth quarter, fueled by accelerating net price realization.”
GIS’ net sales came in at $4.54 billion for its fiscal year 2022 third quarter, ended Feb. 27, 2022, compared to $4.52 billion in the year-ago period. Its adjusted net earnings were $513.90 million, compared to $508.40 million in the prior-year period. Also, the company’s EPS came in at $1.08, up 12.5% year-over-year.
Analysts expect GIS’ revenue to increase 4.2% year-over-year to $18.88 billion in its fiscal year 2022. Its EPS is estimated to increase 5% per annum for the next five years. It surpassed the EPS estimates in three of the trailing four quarters. And over the past year, the stock has gained 13% in price to close Friday’s session at $68.85.
GIS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
GIS has a B grade for Stability and Quality. Within the B-rated Food Makers industry, it is ranked #16 of 85 stocks. Click here to see the additional POWR Rating for Growth, Value, Momentum, and Sentiment for GIS.
Darling Ingredients Inc. (DAR)
Irving, Tex.-based 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.
On Feb. 28, 2022, Randall C. Stuewe, DAR’s Chairman and CEO, said, “Robust demand in our feed segment aligned with increasing demand at Diamond Green Diesel (DGD) positions us well for strong performance in 2022.”
For the fourth quarter, ended Jan. 1, 2022, DAR’s net sales increased 28.5% year-over-year to $1.31 billion. Its net income came in at $157.60 million, up 241.6% year-over-year. And its EPS came in at $0.94, up 248.1% year-over-year.
DAR’s revenue is expected to be $5.51 billion in 2022, representing a 16.3% year-over-year rise. The company’s EPS is expected to increase 43% per annum for the next five years. It surpassed EPS estimates in each of the four trailing quarters. And over the past year, the stock gained 13.4% in price to close Friday’s session at $83.20.
It is no surprise that DAR has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth and Quality.
DAR is ranked #21 in the Food Makers industry. Click here to see the additional POWR Ratings for DAR (Value, Stability, and Sentiment).
GIS shares were trading at $68.31 per share on Monday afternoon, down $0.54 (-0.78%). Year-to-date, GIS has gained 2.14%, versus a -3.80% 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.
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