Zacks Industry Outlook Highlights Hormel Foods, Tyson Foods and Beyond Meat
For Immediate Release
Chicago, IL – August 10, 2023 – Today, Zacks Equity Research discusses Hormel Foods Corp. HRL, Tyson Foods, Inc. TSN and Beyond Meat, Inc. BYND.
Industry: Food - Meat
Link: https://www.zacks.com/commentary/2134160/protein-demand-grows-keep-an-eye-on-these-3-meat-food-stocks
Companies in the Zacks Food – Meat Products industry have been capitalizing on the heightened consumer demand for protein, driven by growing health consciousness. The surge in demand for plant-based meat alternatives has further motivated these companies to make expansions in this domain. In this regard, concentration on innovation and expanding production capabilities has proven advantageous.
Although concerns about elevated manufacturing expenses and disruptions in the supply chain persist, capacity-expansion initiatives and adept pricing strategies position Hormel Foods Corp., Tyson Foods, Inc. and Beyond Meat, Inc. favorably.
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 also 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
Surging Demand for Protein, Plant-Based Meat: The increasing demand for protein-rich food is proving advantageous for meat product companies, which have been consistently enhancing their product portfolios through innovation. The surge in demand for protein-packed food stems from the escalating health consciousness among consumers. Particularly, fitness enthusiasts are adopting protein-intensive ketogenic diets at an increasing rate.
Over the past years, the popularity of meatless alternatives and plant-based meat substitutes has been on the rise. Consumers' growing fondness for fresh products and heightened health awareness are propelling the desire for alternatives to conventional meat items. Most plant-based food substitutes are acclaimed for their reduced reliance on artificial components and additives, making them a wholesome choice.
These alternatives also serve as valuable protein sources for vegan dining practices. Industry experts opine that plant-based protein might catalyze significant disruptions within the conventional meat market. The increasing appetite for plant-based meat has prompted numerous companies to make substantial investments in this domain.
Solid Expansion Initiatives: Industry participants are actively working toward broadening their portfolios and strengthening their market foothold through deliberate collaborations, acquisitions and efforts to increase capacity. In this pursuit, companies are exploring avenues to enhance their manufacturing capability. This includes establishing fresh production facilities, expanding current plants and forming partnerships with co-manufacturers.
Concurrently, certain enterprises are embarking on investments in automation technology, with a specific emphasis on expediting the digitalization process. Some players have also been concentrating on tapping international markets, a strategy that is producing positive outcomes.
Cost Concerns Linger:A persistent issue for numerous participants in the meat food space is the escalating cost of inputs. Companies are observing a rise in the costs associated with raw materials, packaging, supplies, freight and logistics, as well as labor. Heightened expenses related to corn, soybean meal, feed constituents and live animals are adversely impacting profit margins. Many companies anticipate the continuation of inflationary pressures, which is expected to exert ongoing strain on margins.
Zacks Industry Rank Indicates Strong Prospects
The Zacks Food – Meat Products industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #57, which places it in the top 23% 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.
Given the industry’s solid 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 24.9% over this period against the broader sector’s decline of 2.7%. Meanwhile, the S&P 500 witnessed an increase of 7.7%.
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 21.42X compared with the S&P 500’s 19.79X and the sector’s 18.15X.
Over the past five years, the industry has traded as high as 21.76X and as low as 12.24X, with the median being 16.29X.
3 Meat Food Stocks to Keep a Close Eye On
Beyond Meat: This Zacks Rank #2 (Buy) company has been experiencing gains from a robust set of retail and foodservice customers, combined with the increasing demand for plant-based meats. As a manufacturer, marketer and vendor of plant-based meat alternatives, the company has been benefiting from its strong product portfolio, especially due to its focus on innovation.
Other than expanding its product range, Beyond Meat is reaping rewards from its initiatives to strengthen its distribution network and bolster e-commerce proficiency. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Beyond Meat’s bottom line for the current fiscal year suggests growth of 42.6% from the figure reported in the year-ago period. The consensus mark for the bottom line has remained unchanged at a loss of $3.30 per share over the past 30 days. Shares of BYND have declined 18% in the past six months.
Hormel Foods: Hormel Foods’ One Supply Chain initiative has centralized operations, logistics and sourcing decisions to fuel efficiencies for the company. The modernization of its technology and e-commerce abilities, the formation of the Digital Experience Group and transformational efforts at the Jennie-O Turkey Store bode well. This Zacks Rank #3 (Hold) company has been benefiting from its efforts to boost capacity. Additionally, prudent buyouts have been working well for the company.
The Zacks Consensus Estimate for Hormel Foods’ sales for the current fiscal year suggests growth of 0.8% from the figure reported in the year-ago period. The consensus mark for earnings has dropped by a penny over the past 30 days. Shares of HRL have decreased 10.7% in the past six months.
Tyson Foods: The Zacks Rank #3 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 food company has been gaining from strategic growth efforts, including a focus on protein-packed brands and capacity-expansion endeavors. Tyson Foods operates in the Beef, Pork, Chicken, and Prepared Foods segments and has been venturing into alternative sources of meat and protein products.
The Zacks Consensus Estimate for TSN’s current fiscal-year sales indicates a rise of 0.9% from the prior-year reported figure. The consensus mark for Tyson Foods’ earnings has decreased by 2.8% over the past seven days. Shares of the company have declined 8.8% in the past six months.
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Hormel Foods Corporation (HRL) : Free Stock Analysis Report
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Beyond Meat, Inc. (BYND) : Free Stock Analysis Report
