Despite the recession concerns arising due to the persistently high inflation and the consecutive rate hikes, food demand remains stable due to inelasticity. Food stocks tend to be great defensive options. The Conference Board’s most recent recession probability estimates remained near 99%, pointing to the likelihood of a recession in the U.S. within the next 12 months.
Therefore, I think fundamentally strong Sysco Corporation (SYY), Grupo Bimbo, S.A.B. de C.V. (GRBMF), and Glanbia plc (GLAPY) are worth buying now.
The food services industry is evolving with advanced techniques and technologies. Moreover, increased expenditure on dining out and a growing inclination towards fast food consumption are significant driving factors in the industry.
In addition, rising smart device use and internet usage is increasing the popularity of online food delivery, which contributes substantially to the global food industry. Also, the packaged food market in the United States is predicted to grow at a 4.8% CAGR until 2030.
According to Statista, food market revenue will amount to $9.43 trillion in 2023 and is expected to grow annually by 6.2% until 2027.
Take a detailed look at the stocks mentioned above:
Sysco Corporation (SYY)
SYY engages in the marketing and distribution of various food and related products, primarily to the food service or food-away-from-home industry worldwide. Its segments include U.S. Foodservice Operations; International Foodservice Operations; SYGMA; and Other.
SYY’s trailing-12-month ROCE of 106.87% is 919.3% higher than the 10.48% industry average, while its trailing-12-month ROTA of 6.43% is 62.7% higher than the industry average of 3.95%.
SYY’s forward EV/Sales of 0.65x is 60% lower than the industry average of 1.64x. Its forward Price/Sales of 0.51x is 54.7% lower than the industry average of 1.12x.
SYY’s sales came in at $18.59 billion for the second quarter that ended December 31, 2022, up 13.9% year-over-year. Its adjusted EBITDA increased 23.9% year-over-year to $831.30 million. In addition, its adjusted EPS increased 40.4% year-over-year to $0.80.
SYY’s revenue is expected to increase 11% year-over-year to $76.17 billion in 2023. Its EPS is expected to grow 24% year-over-year to $4.03 in 2023. Over the past six months, the stock has gained 4.2% to close the last trading session at $76.04.
SYY’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SYY has a B grade for Growth, Stability, and Value. In the B-rated Food Makers industry, it is ranked #2 out of 83 stocks. Click here for the additional POWR Ratings for Sentiment, Momentum, and Quality for SYY.
Grupo Bimbo, S.A.B. de C.V. (GRBMF)
Headquartered in Mexico City, Mexico, GRBMF, together with its subsidiaries, produces, distributes, and sells various bakery products. The company provides its products under various brands.
GRBMF’s trailing-12-month ROCE of 27.05% is 158% higher than the 10.48% industry average, while its trailing-12-month ROTA of 13.49% is 241.4% higher than the industry average of 3.95%.
GRBMF’s forward EV/Sales of 1.17x is 28.7% lower than the industry average of 1.64x. Its forward Price/Sales of 0.92x is 17.6% lower than the industry average of 1.12x.
For the fourth quarter that ended on December 31, 2022, GRBMF’s net sales increased 15.3% from the year-ago value to MXN108.99 billion ($5.95 billion). Its gross profit increased 12.8% year-over-year to MXN56.19 billion ($3.07 billion). The company’s adjusted EBITDA grew 12% from the year-ago value to MXN14.64 billion ($799.29 million).
Over the past year, the stock has gained 85.9% to close the last trading session at $5.
It’s no surprise that GRBMF has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Growth and Stability a B grade for Value and Quality. It is ranked first in the same industry.
Beyond what is stated above, we’ve also rated GRBMF for Sentiment, and Momentum. Get all GRBMF ratings here.
Glanbia plc (GLAPY)
Headquartered in Kilkenny, Ireland, GLAPY operates as a nutrition company worldwide. The company manufactures and sells sports nutrition and lifestyle nutrition products in various formats and ready-to-drink beverages through various channels, such as specialty retail, online, and gyms, as well the food, drug, mass, and club channels.
GLAPY’s trailing-12-month ROCE of 11.15% is 6.4% higher than the 10.48% industry average, while its trailing-12-month ROTA of 6.67% is 68.9% higher than the industry average of 3.95%.
GLAPY’s forward EV/Sales of 0.79x is 52.1% lower than the industry average of 1.64x. Its forward Price/Sales of 0.68x is 39.4% lower than the industry average of 1.12x.
In the year ended December 31, 2022, GLAPY’s revenue increased 34.4% year-over-year to €5.64 billion ($6.11 billion). Its profit increased 53.4% year-over-year to €256.80 million ($278.13 million). Also, its EPS came in at €92.24, up 60.8% year-over-year.
Street expects GLAPY’s revenue to increase 2.7% year-over-year to $6.01 billion in 2024. The stock has gained 28.4% over the past nine months to close the last trading session at $68.53.
GLAPY has an overall A rating, equating to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Stability and a B for Value. GLAPY is ranked #3 in the same industry. Beyond what is stated above, we’ve also rated GLAPY for Momentum, Growth, Sentiment and Quality and Stability. Get all the GLAPY ratings here.
Consider This Before Placing Your Next Trade…
We are still in the midst of a bear market.
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- 5 Warnings Signs the Bear Returns Starting Now!
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SYY shares were trading at $76.35 per share on Tuesday afternoon, up $0.31 (+0.41%). Year-to-date, SYY has gained 0.51%, versus a 3.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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