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Two Food Stocks to Buy After General Mills (GIS) Posts Weak Q4 Sales

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General Mills (GIS - Free Report) reported their fourth quarter earnings today before the opening bell. The consumer staples giant was able to post a strong quarter earnings-wise, reporting earnings of $0.83 that beat the Zacks Consensus Estimate of $0.76, reaching an EPS surprise of +9.21%.

Despite surpassing earnings estimates, revenues fell short of what analysts were looking for. The company reported a 7% increase in net sales to $4.16 billion, which still fell short of the $4.24 billion expected by analysts according to Refinitiv. As a result, shares of GIS plunged by as much as 10% in intraday trading.

Net sales for the Company’s North American retail segment, which accounts for half of the food company’s total revenue, fell 2%. The company attributed this decline to the lower demand for its Nature Valley and Fiber One snack bars. Consumers have opted to steer away from snack bars because of their high sugar content. Additionally, more health conscious consumers are choosing to go in a different direction with their food choices. General Mills CEO Jeff Harmening noted that Fiber One bars used to be a part of the diet of half of the U.S. population and is now only part of 2% of people’s diet.

The company stated that it would soon begin working on new variations of snack bars, a strategy that worked for them in the past with yogurts. The company gave optimistic guidance for 2020; Harmening went on to say, “We’ll look to improve our performance again in fiscal 2020, and we have plans in place to accelerate our organic sales growth while maintaining our strong margins and cash discipline.” General Mills also acquired Blue Buffalo pet foods last year to diversify its company’s revenue streams and reduce its dependence on its snack, cereal, and yogurt products. The company expects Blue Buffalo’s net sales to increase between 8%-10% in fiscal 2020.

While General Mills missed its revenue target, the company seems determined to adjust to the new health conscious landscape and offer products that can appeal to the changing clientele.

There are additional food stocks that have the potential to make serious moves in terms of growth. Let’s take a further look into these stocks that can really bolster a portfolio.

Medifast

Medifast (MED - Free Report) is a leading manufacturer and distributor of clinically proven healthy living products and programs. It is the brand recommended by more than 20,000 doctors. Medifast is a company that can really benefit from the switch to a health-conscious consumer market. Their health centered products can reach consumers in a way that appeals to their lifestyles. Medifast is currently listed as a Zacks Rank #2 (Buy) and shows tremendous upside in growth.

Our consensus estimates are currently calling for 42.11% earnings increase on the back of a 37.39% sales jump for the next quarter. The stock is also expected to continue to see double digit growth in both earnings and revenue through fiscal 2020. Medifast looks to continue its growth run as it has beat our estimates three out of the previous four quarters, for an average EPS surprise of 9.05%. The company has also been able to increase its earnings by 30.77% with a sales increase of 13.74% compared to the previous quarter.

The Chefs’ Warehouse

Chefs' Warehouse Holdings (CHEF - Free Report) is a distributor of specialty food products in the United States. The Company is focused on serving the specific needs of chefs who own and/or operate restaurants, country clubs, hotels, culinary schools, etc. The Chefs’ Warehouse is currently sitting at a Zacks Rank #2 (Buy), and is another stock that shows a lot of promise in terms of growth.

Our Zacks Consensus Estimates are currently projecting earnings growth of 31.58% to go along with a revenue surge of 10.59% for the following fiscal quarter; our estimates continue to forecast double digit earnings growth through the next fiscal year. Not only is the stock expected to grow substantially, but it also boasts some strong valuation metrics. The food company’s Price/Sales ratio of 0.67 is well below the industry average, and has historically been trading at a discount in comparison to the industry in terms of this ratio.

Both MED and CHEF have been able to blow by the almost stagnant broader food market industry the past two years. Shares of both companies have ballooned over 100%.

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The Chefs' Warehouse, Inc. (CHEF) - free report >>

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