Inflation in May rose to the highest level since December 1981. Prices rose 8.6% from the year-ago value. Food costs, a critical component of inflation, rose 1.2% in May and 10.1% year-over-year. As the consumer staples sector enjoys a constant demand regardless of their price, soaring inflation has kept the growth of the food and beverage industry buoyed.
Amid the COVID-19 pandemic, the top 25 companies in the sector generated $1.50 trillion in revenues in the past year, while the sector’s profits surged to more than $155 billion. On top of it, the First Trust Nasdaq Food & Beverage ETF (FTXG) has gained 5.5% over the past six months, largely outpacing the S&P 500 declines of 13.9% over the same period. The global food & grocery retail market was valued at $11.32 trillion in 2021 and is expected to grow at a CAGR of 3% between 2022 to 2030.
Archer-Daniels-Midland Company (ADM)
ADM, operating through the three broad segments of Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition, procures, transports, stores, and processes agricultural commodities, ingredients, and products globally. The company also exports and imports agricultural commodities and feed products.
This month, ADM and Marathon Petroleum Corp. (MPC) broke ground at their soybean processing facility in North Dakota, which is expected to produce about 600 million pounds of refined vegetable oil annually by harvest 2023. This is anticipated to scale up the company’s lower-carbon, sustainable products area.
In May, the company declared its plans to expand starch production at its Marshall, Minnesota facility, aiming to expand its BioSolutions platform. The expansion should bolster the company’s product portfolio and meet the growing demand for food and beverages.
On May 4, ADM declared a quarterly dividend of $0.40 per share on its common stock, which was payable to shareholders on June 8. Its annual dividend of $1.60 yields 1.81% on prevailing prices. The company’s dividend payouts have increased at a 4% CAGR over the past three years and a 4.4% CAGR over the past five years. The company has a record of 28 years of consecutive dividend growth.
ADM’s net sales increased 25.2% year-over-year to $23.65 billion in the first quarter ended March 31. Its gross profit grew 22.5% from the year-ago value to $1.90 billion, while its adjusted net earnings improved 38.2% year-over-year to $1.08 billion. The company’s adjusted EPS increased 36.7% from the same period last year to $1.90.
The consensus EPS estimate of $1.66 for the fiscal second quarter (ending June 2022) indicates a 24.7% year-over-year improvement. The consensus revenue estimate of $25.13 billion for the same quarter reflects a 9.6% increase from the same period last year. The company has an impressive earnings surprise history, as it has beaten the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 26.2% over the past year and 27.2% year-to-date to close the last trading session at $85.98.
ADM’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.ADM is also rated a B in Growth, Value, and Sentiment. Within the Agriculture industry, it is ranked #6 out of 35 stocks. To see additional POWR Ratings for Momentum, Stability, and Quality for ADM, click here.
Tyson Foods, Inc. (TSN)
TSN is a food company operating globally through its four broad segments of Beef; Pork; Chicken; and Prepared Foods. The company processes live-fed cattle and market hogs and manufactures and sells refrigerated food products.
On May 23, TSN declared a dividend of $0.46 per share on Class A common stock, payable on September 15. This cumulates to an annual dividend of $1.84 and yields 2.11% on the current share price. TSN’s dividend payouts have increased at a CAGR of 8.6% over the past three years and 17.2% over the past five years. The company has had ten consecutive years of dividend growth.
In the second quarter ended April 2, TSN’s sales have increased 16.1% year-over-year to $13.12 billion. Adjusted operating income came in at $1.16 billion, up 57.1% from the prior-year quarter. Adjusted net income per share attributable to TSN improved 70.9% from the prior-year period to $2.29.
Analysts expect TSN’s revenue for the fiscal year ending September 2022 to be $52.73 billion, reflecting a 12.1% year-over-year growth. Likewise, Street expects the company’s EPS to increase 9.8% from the prior year to $9.09 for the same year. Additionally, TSN has topped Street EPS estimates in each of the trailing four quarters, which is impressive.
TSN has gained 10.2% over the past year and 1.9% over the past six months to close yesterday’s trading session at $85.31.It is no surprise that TSN has an overall B rating, which translates to Buy in our POWR Rating system. The stock has an A grade for Value and a B grade for Sentiment. In the B-rated Food Makers industry, it is ranked #12 of 86 stocks.
Beyond what we’ve stated above, we have also given TSN grades for Growth, Momentum, Quality, and Stability. Get all the TSN ratings here.
Bunge Limited (BG)
BG operates as a global agribusiness and food company. The company functions through its Agribusiness; Refined and Specialty Oils; Milling; and Sugar and Bioenergy segments.
In May, Chevron Corporation (CVX) subsidiary Chevron U.S.A. Inc. and BG subsidiary Bunge North America, Inc. announced the launch of their Bunge Chevron Ag Renewables LLC joint venture. The new company is expected to develop fuel feedstocks leveraging BG’s oilseed processing expertise. This might enhance the company’s operative capability.
In April, BG announced a commercial partnership with new winter oilseed crop developer CoverCress Inc. to bring renewable oilseed and animal feed crops to the market. “Bunge is pleased to expand our relationship with CCI to continue to develop next generation lower carbon feedstocks, which will also help meet the growing demand for renewable fuels.”, stated BG CEO Greg Heckman.
On May 12, BG announced a 19% increase in the regular quarterly cash dividend to $0.625 per common share, payable on September 2. This cumulates to an annual dividend of $2.50 and yields 2.22% on the current share price. BG’s dividend payouts have increased at a CAGR of 1.6% over the past three years and 4.6% over the past five years.
For the fiscal first quarter ended March 31, BG’s net sales increased 22.5% year-over-year to $15.88 billion. Its gross profit rose 5% from its year-ago value to $1.20 billion. Adjusted Net income available for common shareholders stood at $654 million, up 38.9% from the same period last year, while adjusted net income per common share improved 36.1% from the prior-year period to $4.26.
Street EPS estimate for the current fiscal quarter (ending June 2022) of $3.14 indicates a rise of 20.2% from the prior-year quarter. Street revenue estimate for the same quarter of $18.57 billion reflects a 20.7% year-over-year growth. BG has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 24.1% over the past year and 18% year-to-date to close yesterday’s trading session at $110.19.
BG’s strong fundamentals are reflected in its POWR Ratings. BG has a B grade for Growth. It is ranked #10 in the Agriculture industry. Click here to see the additional POWR Ratings for BG (Value, Momentum, Stability, Sentiment, and Quality).
ADM shares closed at $84.68 on Friday, down $-1.30 (-1.51%). Year-to-date, ADM has gained 26.53%, versus a -17.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.3 Dividend-Paying Food Stocks to Add to Your Watchlist appeared first on StockNews.com