The food industry is considered one of the safest industries on which to bet amid market volatility, given its non-cyclical nature. The inelastic demand for foodstuff ensures stable sales for companies in the food sector.
Food prices have risen 3.6% over the past 12 months, as of February 2021, according to the Bureau of Labor Statistics. This implies higher revenues and earnings for the food industry because food demand has remained constant. Furthermore, rising inflation rates have incentivized many investors to focus on the non-cyclical industries such as food.
Given this backdrop, we think food companies Mondelez International, Inc. (MDLZ) and Sysco Corporation (SYY) should continue to generate stable revenues and their stocks should keep soaring.
Mondelez International, Inc. (MDLZ)
Based in Illinois, MDLZ manufactures and markets snack food and beverage products. The company operates through four segments — Latin America, Asia, Middle East, and Africa (AMEA), Europe and North America. Its portfolio includes snack brands including Nabisco, Oreo, Cadbury, Milka and Toblerone chocolate, Trident gum, and Tang powdered beverages. MDLZ sells its products to supermarket chains, gasoline stations, drug stores, value stores and retail food outlets, among others.
The company entered an agreement on March 9, 2021 to acquire Gourmet Food Holdings, a leading manufacturer and distributor of premium entertaining food products. Last month, MDLZ’s innovation and venture hub, SnackFutures, announced the launch of CoLab, which is a new start-up engagement program for early-stage well-being snack brands. Also, MDLZ’s Board of Directors declared a regular quarterly dividend of $0.32 per share payable on April 14, 2021.
The company’s net revenues have increased 5.6% year-over-year to $7.30 billion for the fourth quarter ended December 31, 2020. MDLZ’s gross profit has increased 4.1% year-over-year to $2.87 billion. Its operating income came in at $1.15 billion, which represents an improvement of 26.8% year-over-year. Moreover, its net earnings were $1.16 billion, up 57.5% year-over-year. MDLZ’s non-GAAP EPS also increased 9.8% year-over-year to $0.67.
A consensus EPS estimate of $0.65 for the quarter ending June 30, 2021 represents an improvement of 3.2% year-over-year. Also, MDLZ surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $6.41 billion for the same quarter ending June 30, 2021 represents an 8.4% gain on a year-over-year basis. The stock has gained 12.4% over the past year and closed yesterday’s trading session at $57.23.
MDLZ’s POWR Ratings reflect this promising outlook. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock has a B grade for Sentiment, Stability and Quality. We have also rated MDLZ for Growth, Value and Momentum. Click here to access all MDLZ’s ratings.
MDLZ is ranked #23 of 82 stocks in the B-rated Food Makers industry.
Sysco Corporation (SYY)
Founded in 1969, SYY markets and distributes a range of food and related products primarily to the foodservice or food-away-from-home industry. The company operates primarily through three segments—Broadline, SYGMA and Other. It distributes frozen foods, such as meats, seafood, vegetables, canned and dry foods and dairy products, and non-food items, such as paper plates and cooking utensils. SYY serves restaurants, hospitals and nursing homes, and schools and colleges, among others.
SYY announced on March 10 that it has reduced its outstanding debt by $1.10 billion. The company’s board of directors also declared a regular quarterly cash dividend of $0.45 per share, payable on April 23. Also, SYY introduced nine innovative concepts through its Cutting-Edge Solutions platform on February 15.
SYY was affected by the COVID-19 pandemic; the demand for its products and services fell significantly. However, the company has managed to stay afloat. Its operating expenses have decreased more than 17% year-over-year to $1.89 billion for its fiscal 2021 second quarter, ended December 26, 2020. Moreover, the company’s gross profit from its SYGMA segment has increased more than 4% year-over-year to $129.30 million.
A consensus EPS estimate of $0.61 for the quarter ending June 30, 2021 represents an improvement of 310.3% year-over-year. Also, the consensus revenue estimate of $13.92 billion for the same quarter represents a 57% gain on a year-over-year basis. The stock has gained 76.8% over the past year and closed yesterday’s trading session at $83.24.
SYY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has a B grade for Growth, Value and Quality as well. Click here to see the additional ratings for SYY (Stability, Momentum and Sentiment).
SYY is ranked #11 in the same industry.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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MDLZ shares were unchanged in after-hours trading Tuesday. Year-to-date, MDLZ has declined -1.18%, versus a 5.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More…
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