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2 Meat Food Stocks Worth Watching on Bright Industry Trends
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The Zacks Food – Meat Products industry players have been benefiting from the elevated demand for protein stemming from consumers’ shift toward health and wellness. Companies’ focus on catering to consumers’ evolving preferences has been working well.
However, several meat companies have been battling hurdles associated with cost inflation, though the trend is moderating. Also, companies remain troubled by challenges in the Beef business. Nonetheless, initiatives to expand capacity and undertake innovation position Tyson Foods, Inc. (TSN - Free Report) and Pilgrim's Pride Corporation (PPC - Free Report) well for growth.
About the Industry
The Zacks Food – Meat Products industry comprises companies that manufacture, process, market, distribute and sell a wide range of meat products like chicken, pork, beef, prepared food and plant-based meats. Some companies also offer poultry and turkey products, alongside providing nutritional food products and supplements, desserts and drink mixes and industrial gelatin products. Most companies offer their products to retail and foodservice customers, while some cater to deli and commercial operators, including grocery retailers, grocery wholesalers, meat distributors, warehouse club stores, industrial food processing companies, chain restaurants, international export companies, school cafeterias and hospitals, among others. Some products offered include frozen whole chicken, primary pork cuts, salads, sandwiches and meatballs.
Major Trends Shaping the Future of the Meat Food Industry
Protein Demand Rises, Plant-Based Meat Gains Traction: Increased inclination toward protein-rich sustenance has been proving advantageous for meat companies, which have continuously enhanced their product lines through innovative approaches. In recent years, the popularity of meatless alternatives and plant-based meat substitutes has been steadily increasing, driven by consumers' preference for fresh, healthier options over traditional meat products. Most plant-based food alternatives are well-regarded for their reduced reliance on artificial ingredients and additives, making them a wholesome choice. These alternatives also serve as valuable sources of protein for those following vegan dietary practices. Industry experts believe that plant-based protein could lead to significant disruptions in the traditional meat market.
Robust Expansion Strategies: Companies in the industry are actively engaged in initiatives aimed at diversifying their product portfolios and fortifying their position in the market through strategic collaborations, acquisitions and capacity expansion efforts. As part of these endeavors, businesses are looking for opportunities to bolster their manufacturing capabilities, such as establishing new production facilities, enlarging existing plants and entering into partnerships with co-manufacturers. Concurrently, select companies are making investments in automation technology, with a keen focus on accelerating the digitalization process. Additionally, some players are directing their efforts toward entering international markets, a strategy that is yielding favorable results.
Challenges in the Beef Segment: The beef segment is battling numerous challenges in 2024, including consumer caution, economic uncertainties, shifting preferences and reduced production. The segment is likely to continue witnessing consumer caution on account of the sluggish global economic recovery post the pandemic. Consumers, particularly, are shifting toward value-for-money products over premium ones due to heightened caution. This is likely to dampen demand for more expensive cuts of beef, leading to soft sales and revenues for producers. Additionally, the beef segment is undergoing a significant decline in production, which is resulting in elevated retail prices for consumers. The reduced production is likely to put pressure on beef processors, leading to challenges in maintaining profitability throughout the supply chain.
Ongoing Cost Concerns: High input costs have been a persistent issue for numerous participants in the meat food space, though the trend is moderating. Companies have been incurring elevated costs associated with raw materials, packaging, supplies, freight and logistics and labor. The continuation of inflationary pressures, along with increased operating expenditure, may strain margins.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Food – Meat Products industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #110, which places it in the top 44% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since the beginning of January 2024, the industry’s earnings estimate for fiscal 2024 has climbed 1.4%.
Given the industry’s prospects, we present a few stocks that you may want to consider for your portfolio. However, before that, it’s worth taking a look at the industry’s performance and current valuation.
Industry vs. Broader Market
The Zacks Food – Meat Products industry has underperformed the broader Zacks Consumer Staples sector and the S&P 500 over the past year.
The industry has declined 21.3% over this period compared with the broader sector’s decrease of 7%. Meanwhile, the S&P 500 has witnessed an increase of 21.1%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing Consumer Staple stocks, the industry is currently trading at 19.84X compared with the S&P 500’s 20.47X and the sector’s 17.23X.
Over the past five years, the industry has traded as high as 21.76X and as low as 12.24X, with the median being 16.8X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
2 Meat Food Stocks to Keep a Close Eye On
Tyson Foods: This Zacks Rank #1 (Strong Buy) company has been benefiting from its three main pillars. These include driving growth across the core protein platform, fueling growth through its robust brands and focusing on prudent international expansion. This meat products giant has been reaping gains from its strategic expansion initiatives, which emphasize protein-rich brands and efforts to expand its production capacity. Tyson Foods operates across various segments, including Beef, Pork, Chicken, and Prepared Foods, while also exploring alternative meat and protein sources as part of its diversification strategy. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tyson Foods’ fiscal 2024 earnings per share (EPS) has increased by 5.6% over the past 60 days to $2.26. This indicates a rise of 68.7% from the prior-year reported figure. Shares of TSN have rallied almost 18% in the past three months.
Price and Consensus: TSN
Pilgrim’s Pride: Pilgrim’s Pride’s focus on key customers is a pathway for refining its portfolio and creating competitive advantages. Apart from this, this Zacks Rank #3 (Hold) company has been steadily augmenting the marketing support of its brands as they expand and enter new regions. This provider of fresh, frozen and value-added chicken and pork products continues to explore M&A opportunities to further diversify its portfolio across segments and geographies. Additionally, it resorts to frequent supply-chain improvements to enhance efficiency and reduce costs.
The Zacks Consensus Estimate for Pilgrim’s Pride’s 2024 EPS has remained unchanged over the past 30 days at $2.48. This suggests growth of 62.4% from the prior-year reported figure. Shares of PPC have risen 9% in the past three months.
Price and Consensus: PPC
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2 Meat Food Stocks Worth Watching on Bright Industry Trends
The Zacks Food – Meat Products industry players have been benefiting from the elevated demand for protein stemming from consumers’ shift toward health and wellness. Companies’ focus on catering to consumers’ evolving preferences has been working well.
However, several meat companies have been battling hurdles associated with cost inflation, though the trend is moderating. Also, companies remain troubled by challenges in the Beef business. Nonetheless, initiatives to expand capacity and undertake innovation position Tyson Foods, Inc. (TSN - Free Report) and Pilgrim's Pride Corporation (PPC - Free Report) well for growth.
About the Industry
The Zacks Food – Meat Products industry comprises companies that manufacture, process, market, distribute and sell a wide range of meat products like chicken, pork, beef, prepared food and plant-based meats. Some companies also offer poultry and turkey products, alongside providing nutritional food products and supplements, desserts and drink mixes and industrial gelatin products. Most companies offer their products to retail and foodservice customers, while some cater to deli and commercial operators, including grocery retailers, grocery wholesalers, meat distributors, warehouse club stores, industrial food processing companies, chain restaurants, international export companies, school cafeterias and hospitals, among others. Some products offered include frozen whole chicken, primary pork cuts, salads, sandwiches and meatballs.
Major Trends Shaping the Future of the Meat Food Industry
Protein Demand Rises, Plant-Based Meat Gains Traction: Increased inclination toward protein-rich sustenance has been proving advantageous for meat companies, which have continuously enhanced their product lines through innovative approaches. In recent years, the popularity of meatless alternatives and plant-based meat substitutes has been steadily increasing, driven by consumers' preference for fresh, healthier options over traditional meat products. Most plant-based food alternatives are well-regarded for their reduced reliance on artificial ingredients and additives, making them a wholesome choice. These alternatives also serve as valuable sources of protein for those following vegan dietary practices. Industry experts believe that plant-based protein could lead to significant disruptions in the traditional meat market.
Robust Expansion Strategies: Companies in the industry are actively engaged in initiatives aimed at diversifying their product portfolios and fortifying their position in the market through strategic collaborations, acquisitions and capacity expansion efforts. As part of these endeavors, businesses are looking for opportunities to bolster their manufacturing capabilities, such as establishing new production facilities, enlarging existing plants and entering into partnerships with co-manufacturers. Concurrently, select companies are making investments in automation technology, with a keen focus on accelerating the digitalization process. Additionally, some players are directing their efforts toward entering international markets, a strategy that is yielding favorable results.
Challenges in the Beef Segment: The beef segment is battling numerous challenges in 2024, including consumer caution, economic uncertainties, shifting preferences and reduced production. The segment is likely to continue witnessing consumer caution on account of the sluggish global economic recovery post the pandemic. Consumers, particularly, are shifting toward value-for-money products over premium ones due to heightened caution. This is likely to dampen demand for more expensive cuts of beef, leading to soft sales and revenues for producers. Additionally, the beef segment is undergoing a significant decline in production, which is resulting in elevated retail prices for consumers. The reduced production is likely to put pressure on beef processors, leading to challenges in maintaining profitability throughout the supply chain.
Ongoing Cost Concerns: High input costs have been a persistent issue for numerous participants in the meat food space, though the trend is moderating. Companies have been incurring elevated costs associated with raw materials, packaging, supplies, freight and logistics and labor. The continuation of inflationary pressures, along with increased operating expenditure, may strain margins.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Food – Meat Products industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #110, which places it in the top 44% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since the beginning of January 2024, the industry’s earnings estimate for fiscal 2024 has climbed 1.4%.
Given the industry’s prospects, we present a few stocks that you may want to consider for your portfolio. However, before that, it’s worth taking a look at the industry’s performance and current valuation.
Industry vs. Broader Market
The Zacks Food – Meat Products industry has underperformed the broader Zacks Consumer Staples sector and the S&P 500 over the past year.
The industry has declined 21.3% over this period compared with the broader sector’s decrease of 7%. Meanwhile, the S&P 500 has witnessed an increase of 21.1%.
One-Year Price Performance
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Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing Consumer Staple stocks, the industry is currently trading at 19.84X compared with the S&P 500’s 20.47X and the sector’s 17.23X.
Over the past five years, the industry has traded as high as 21.76X and as low as 12.24X, with the median being 16.8X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
2 Meat Food Stocks to Keep a Close Eye On
Tyson Foods: This Zacks Rank #1 (Strong Buy) company has been benefiting from its three main pillars. These include driving growth across the core protein platform, fueling growth through its robust brands and focusing on prudent international expansion. This meat products giant has been reaping gains from its strategic expansion initiatives, which emphasize protein-rich brands and efforts to expand its production capacity. Tyson Foods operates across various segments, including Beef, Pork, Chicken, and Prepared Foods, while also exploring alternative meat and protein sources as part of its diversification strategy. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tyson Foods’ fiscal 2024 earnings per share (EPS) has increased by 5.6% over the past 60 days to $2.26. This indicates a rise of 68.7% from the prior-year reported figure. Shares of TSN have rallied almost 18% in the past three months.
Price and Consensus: TSN
Pilgrim’s Pride: Pilgrim’s Pride’s focus on key customers is a pathway for refining its portfolio and creating competitive advantages. Apart from this, this Zacks Rank #3 (Hold) company has been steadily augmenting the marketing support of its brands as they expand and enter new regions. This provider of fresh, frozen and value-added chicken and pork products continues to explore M&A opportunities to further diversify its portfolio across segments and geographies. Additionally, it resorts to frequent supply-chain improvements to enhance efficiency and reduce costs.
The Zacks Consensus Estimate for Pilgrim’s Pride’s 2024 EPS has remained unchanged over the past 30 days at $2.48. This suggests growth of 62.4% from the prior-year reported figure. Shares of PPC have risen 9% in the past three months.
Price and Consensus: PPC
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