Who’s Hungry? Food Companies Are Gobbling Up Profits

IIn many ways, the pandemic was a time of reinvention for the food industry. When the economy stalled last spring, restaurants in the United States turned and designed unique al fresco dining. Consumers began to bake bread, stock up on pantries, cook at home more often, and experiment with new recipes, all of which led to a decline in sales for packaged food and beverage companies. At the same time, food processors saw an increase in Covid cases, raising concerns about a supply chain stalemate.

Now that US coronavirus cases are falling and the number of people vaccinated is increasing, food companies are preparing for a “new normal” (whatever that may be). With this week’s revenue rising, food and beverage manufacturers of all kinds will be able to thrive in a post-pandemic economy in the summer months – and beyond.

Take McDonald’s (MCD): the burger giant reported Revenue growth of 13.6% in the US in the first quarter (year-over-year) that exceeded analysts’ expectations. With the demand for personal food increasing amid the resilience of the take-out market, the fast food company is concerned about a labor crisis and is considering a raise to attract more employees. The company also says its chicken products play a huge role in increasing its profits.

Indeed, America’s voracious appetite for anything chicken-related has fueled the pilgrim’s pride (PPC), a leading US chicken processor who reported Quarterly revenue of $ 3.27 billion, or 6.5% more than the prior-year quarter. Pilgrim’s sales increased in all major markets including Mexico, Europe and the UK. “With more vaccinations, we believe that the demand for food service can return to pre-COVID levels.” said the company’s CFO in the Call for prizesThis shows that there is room for further growth.

The packaged food conglomerate Kraft Heinz dines with more Americans (KHC) also had an excellent quarter. The food manufacturer generated Net sales of $ 6.39 billion, up 3.9% year over year. What’s even more impressive is that Kraft Heinz increased its net profit by 25%. Unsurprisingly, the company’s stock has suffered a rift: stocks are up over 18% year-to-date last year, and over 30% since that time.

Hershey Co (HSY) also had a good quarter as more Americans indulged in home movie nights and to celebrate Valentine’s Day. The chocolate maker exceeded analysts’ expectations. reporting $ 395.79 million in sales, an impressive 46% gain over the previous year. “In a time like COVID, consumers were just hungry for connections.” said CEO Michele Buck at the Call for prizes. “And so were the roles our brands played throughout the season in creating those connectivity and traditions and rituals with something that consumers were just so hungry for.”

With these strong gains, investors could be tempted to buy up stocks of food manufacturers and retailers. But in the middle growing concerns about inflationinvestors should avoid food companies that rely on commodities whose prices have been soaring in recent weeks?

Not according to Barclays analyst Andrew Lazar. The celebrated US food researcher recently divided His outlook for the Wall Street Journal goes something like this: In times of rising raw material costs, food manufacturers and retailers have been able to pass price increases on to consumers while finding creative ways to cut costs. Then, when raw material costs return to normal levels, these food companies can maintain their higher costs in the face of changed consumer expectations and position these companies for higher profit margins and higher sales.

In other words, sharpen your knives, investors. It’s a good time to start browsing food supplies.

The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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