We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is Nomad Foods' Pricing Power Enough to Offset Protein Costs?
Read MoreHide Full Article
Key Takeaways
NOMD saw Q1 gross margin rise to 27.8%, but adjusted EBITDA fell 1.8% amid protein cost inflation.
NOMD is experiencing input inflation in key protein categories like chicken and red meat.
Pricing actions are underway but expected to lag rising protein costs in the near term.
Nomad Foods Limited (NOMD - Free Report) is contending with mounting input cost pressures, particularly in protein categories like chicken and red meat. In the first quarter of 2025, the company flagged a rise in protein inflation, attributed to both heightened demand and what it referred to as Asian flu-related disruptions in Europe. These cost increases come as Nomad maintains a significant portfolio exposure to lean proteins, a key element of its frozen food offerings.
The bigger concern lies in Nomad’s ability to keep pace with these rising costs through pricing. Management indicated that pricing actions are underway but expected to be gradual, with implementation likely to lag cost inflation in the near term. Although gross margin expanded 90 basis points year over year to 27.8% in the first quarter of 2025, adjusted EBITDA declined 1.8%, reflecting early signs of margin pressure. The updated guidance for 2025 also indicates a lower adjusted EBITDA growth range of 0% to 2%, revised downward from the prior band of 2-4%.
While Nomad Foods notes a track record of pricing to recover cost increases, prolonged inflation in protein inputs could further test consumer elasticity, especially amid value-seeking behavior in key markets like the United Kingdom. As the company balances cost recovery with demand retention, its ability to manage near-term inflation without compromising volume or competitive position will remain a critical factor. Maintaining brand strength while offsetting margin pressure will be key in the quarters ahead.
How NOMD’s Peers Navigate Rising Costs
Like Nomad Foods, Conagra Brands (CAG - Free Report) and Lamb Weston (LW - Free Report) are managing inflationary pressures and shifting consumer demand.
Conagra continues to face elevated protein and input costs, which contributed to a 389-basis-point adjusted gross margin decline in the third quarter of fiscal 2025. The company is focusing on portfolio restructuring, divesting lower-growth assets and investing in high-margin categories like snacks to offset margin pressure.
Meanwhile, Lamb Weston is emphasizing cost efficiency and operational restructuring. The company reported 9% global volume growth in the third quarter of fiscal 2025 and is executing more than 30 strategic projects for fiscal 2025, even as its price/mix declined 5% due to strategic pricing adjustments. Lamb Weston aims to drive profitability through network optimization and new customer wins across international and foodservice channels.
NOMD’s Price Performance, Valuation and Estimates
Shares of Nomad Foods have lost around 5.5% in the past month compared with the industry’s decline of 1.7%.
Image Source: Zacks Investment Research
From a valuation standpoint, NOMD trades at a forward price-to-earnings ratio of 7.89X, down from the industry’s average of 15.77X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales and earnings per share implies year-over-year growth of 4.6% and 7.3%, respectively.
Image: Bigstock
Is Nomad Foods' Pricing Power Enough to Offset Protein Costs?
Key Takeaways
Nomad Foods Limited (NOMD - Free Report) is contending with mounting input cost pressures, particularly in protein categories like chicken and red meat. In the first quarter of 2025, the company flagged a rise in protein inflation, attributed to both heightened demand and what it referred to as Asian flu-related disruptions in Europe. These cost increases come as Nomad maintains a significant portfolio exposure to lean proteins, a key element of its frozen food offerings.
The bigger concern lies in Nomad’s ability to keep pace with these rising costs through pricing. Management indicated that pricing actions are underway but expected to be gradual, with implementation likely to lag cost inflation in the near term. Although gross margin expanded 90 basis points year over year to 27.8% in the first quarter of 2025, adjusted EBITDA declined 1.8%, reflecting early signs of margin pressure. The updated guidance for 2025 also indicates a lower adjusted EBITDA growth range of 0% to 2%, revised downward from the prior band of 2-4%.
While Nomad Foods notes a track record of pricing to recover cost increases, prolonged inflation in protein inputs could further test consumer elasticity, especially amid value-seeking behavior in key markets like the United Kingdom. As the company balances cost recovery with demand retention, its ability to manage near-term inflation without compromising volume or competitive position will remain a critical factor. Maintaining brand strength while offsetting margin pressure will be key in the quarters ahead.
How NOMD’s Peers Navigate Rising Costs
Like Nomad Foods, Conagra Brands (CAG - Free Report) and Lamb Weston (LW - Free Report) are managing inflationary pressures and shifting consumer demand.
Conagra continues to face elevated protein and input costs, which contributed to a 389-basis-point adjusted gross margin decline in the third quarter of fiscal 2025. The company is focusing on portfolio restructuring, divesting lower-growth assets and investing in high-margin categories like snacks to offset margin pressure.
Meanwhile, Lamb Weston is emphasizing cost efficiency and operational restructuring. The company reported 9% global volume growth in the third quarter of fiscal 2025 and is executing more than 30 strategic projects for fiscal 2025, even as its price/mix declined 5% due to strategic pricing adjustments. Lamb Weston aims to drive profitability through network optimization and new customer wins across international and foodservice channels.
NOMD’s Price Performance, Valuation and Estimates
Shares of Nomad Foods have lost around 5.5% in the past month compared with the industry’s decline of 1.7%.
Image Source: Zacks Investment Research
From a valuation standpoint, NOMD trades at a forward price-to-earnings ratio of 7.89X, down from the industry’s average of 15.77X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales and earnings per share implies year-over-year growth of 4.6% and 7.3%, respectively.
Image Source: Zacks Investment Research
NOMD stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.