Food stocks have emerged as a compelling investment option, especially in the wake of their performance over the last two years. Despite facing 40-year high inflation levels, many companies in this sector have shown remarkable pricing power.
Looking ahead, the global food and grocery retail market is valued at $12.29 trillion in 2020. Further, it’s poised for significant growth, projected to reach $17.29 trillion by 2027, growing at a 5% annual rate. This expansive industry offers a variety of opportunities. And, numerous companies fervently battle for a share of consumers’ food spending.
Additionally, the market’s global revenue is set to rise markedly. According to Statista, an impressive 38.46% increase is anticipated between 2023 and 2028. This could potentially propel the market to an astounding $12.97 trillion by the end of this period.
As investors recalibrate their portfolios for 2024, these three food stocks emerge as particularly promising prospects, offering a blend of stability and growth potential.
Lamb Weston (LW)
Lamb Weston (NYSE:LW), a producer of frozen French fries, excels in the investment landscape. LW caters to both home consumers and the profitable restaurant supply sector. Its dual revenue streams from retail and high-margin restaurant sales, especially during holiday seasons, highlight the company’s diverse income potential.
Moreover, the company’s net sales have soared by an impressive 48%, reaching $1.6 billion. Recent acquisitions have driven sales by $375 million. Also, the company is engaging in shareholder value enhancement, with the implementation of a $100 million share buyback program. Further emphasizing this commitment, the board has approved a plan for an additional buyback of up to $500 million, demonstrating a strong dedication to boosting investor returns.
Additionally, the company’s financial strategy exudes confidence. It balances a high debt-to-equity ratio with the unwavering guarantee that 85% of its debt matures post-2026. This positioning is strong for sustained growth and reinforcement of investor confidence.
PepsiCo (PEP)
PepsiCo (NASDAQ:PEP), while globally recognized for its iconic soda, also stands as the largest food processor in the U.S. Despite this impressive standing, the company’s shares have dipped slightly, with a decrease of just over 5% since the start of the year. However, indicators show a positive shift may be on the horizon.
Reflecting this potential change in trajectory, PepsiCo revealed an encouraging 6.7% increase in revenue year over year (YOY), reaching $23.45 billion. This financial strength is further highlighted by its non-GAAP earnings per share of $2.25. This surpasses expectations by 10 cents and showcases the company’s resilience and robust health across its diverse business endeavors.
Furthermore, the company has continued its trend of innovative growth, unveiling plans to launch Ghost Kitchens for efficient hot food delivery. Simultaneously, it has made eco-friendly strides by replacing diesel with cooking oil in delivery trucks. Also, PepsiCo strategically invests in global agriculture, further enhancing its diverse business model.
Celsius (CELH)
Celsius Holdings (NASDAQ:CELH) is clearly a prominent player in the food stock sector. Additionally, it specializes in producing health drinks, notably its flagship Celsius brand, renowned for natural ingredients like green tea extract and ginger root. Demonstrating more than just success, the company has witnessed a remarkable 47% YOY bump, exemplifying its significant market impact.
Moreover, Celsius achieved remarkable growth in the third quarter, becoming Amazon’s (NASDAQ:AMZN) top-selling energy drink with a 21.4% market share. Now, CELH surpasses Monster (NASDAQ:MNST) and Redbull. Concurrently, its GAAP earnings per share surged to 89 cents, surpassing estimates by 38 cents. Also, a record-breaking 104% increase in revenue to $385 million, up from last year’s $188 million, underscores its robust growth trajectory.
Furthermore, Celsius partnered with PepsiCo in 2022 to tap into global markets. It strategically targets Canada in the first quarter of 2024 as their first Pepsi-assisted international venture. This expansion, coupled with new products like Vibe Flavor and Cosmic Vibe, positions CELH stock for dynamic growth.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
