Growing consumer demand for protein-rich products, fueled by an increasing focus on health and wellness, has been working well for the Zacks Food – Meat Products industry. Players in the space have responded to these trends by diversifying their product offerings, expanding production capacity and exploring plant-based meat alternatives.
However, many meat companies face challenges from rising input costs and elevated operating expenses. Despite these obstacles, Tyson Foods, Inc. TSN, Pilgrim's Pride Corporation PPC and Beyond Meat, Inc. BYND remain well-positioned for growth due to their strategic initiatives and ability to tap into evolving consumer preferences.
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 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
Rising Protein Consumption & Growth of Plant-Based Meat: The increasing demand for protein-rich diets continues to benefit meat companies, encouraging them to consistently innovate their product offerings. This surge is driven by rising health awareness, especially among fitness enthusiasts adopting high-protein diets like keto. In recent years, the growing popularity of plant-based meat alternatives has been a notable trend as consumers increasingly seek fresher, healthier options over traditional meat products. These alternatives are highly regarded for minimizing the use of artificial ingredients and additives, making them a more wholesome choice. They also offer a valuable protein source for individuals following vegan or plant-based diets. Industry experts suggest that plant-based protein could disrupt the conventional meat industry, positioning it as a strong competitor in the protein market.
Strategic Expansion Initiatives: Industry players have been diversifying their product portfolios and solidifying their market presence through strategic initiatives, including mergers, acquisitions and capacity expansion efforts. Companies are bolstering production capabilities by launching new facilities, expanding plants and collaborating with co-manufacturers. Several companies are also investing in automation and advanced technology to accelerate digital transformation and streamline operations. Some companies are focusing on expanding into international markets, where they are seeing favorable outcomes and strong growth potential.
Cost Pressures: High input costs remain a challenge for many companies in the meat industry. Rising expenses related to feed, raw materials, logistics and labor have increased production costs. The continued pressure from inflation, coupled with elevated operational expenses, remains a threat to profit margins.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Food – Meat Products industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #45, which places it in the top 18% 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 robust 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.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since the beginning of June 2024, the industry’s earnings estimate for the current fiscal year earnings has jumped 11%.
Given the industry’s impressive 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 gained 12.4% over this period compared with the broader sector’s rise of 15.8%. Meanwhile, the S&P 500 has witnessed a jump of 33.5%.
One-Year Price Performance
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 15.71X compared with the S&P 500’s 21.98X and the sector’s 18.36X.
Over the past five years, the industry has traded as high as 21.76X and as low as 12.24X, with the median being 16.81X, as the chart below shows.
Price-to-Earnings Ratio (Past Five Years)
3 Meat Food Stocks to Keep a Close Eye On
Pilgrim’s Pride: This Zacks Rank #1 (Strong Buy) company’s portfolio diversification strategies, including its focus on branded offerings and strategic key customer partnerships, play a crucial role in driving growth. Pilgrim’s Pride’s strategic investments in its U.S. and Mexican operations, including new facilities and expanded capacities, support growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
In addition to expansion, this provider of fresh, frozen and value-added chicken and pork products has been focused on cost-cutting measures, including optimizing operational processes and reducing grain input costs, which is driving profitability. The Zacks Consensus Estimate for Pilgrim’s Pride’s current fiscal year earnings per share (EPS) has risen by 12.7% over the past 60 days to $4.79. Shares of PPC have soared 95.2% in the past year.
Price and Consensus: PPC
Tyson Foods: This Zacks Rank #3 (Hold) company benefits from a diverse portfolio of core proteins, including chicken, pork and beef. Strategic investments in brand building and innovation have been reinforcing Tyson Foods’ leadership position, driving long-term loyalty. The meat products giant’s growth strategy is anchored in three key pillars — operational excellence, customer and consumer obsession and sustainability.
Operational excellence is another key strength, supported by initiatives like plant closures and digitalization. The Zacks Consensus Estimate for Tyson Foods’ current fiscal year EPS has increased by 8% over the past 60 days to $2.82. Shares of TSN have rallied 21.2% in the past year.
Price and Consensus: TSN
Beyond Meat: Rising consumer demand for healthier, sustainable and ethically produced foods has been a key driver for this Zacks Rank #3 company. As a producer, marketer and seller of plant-based meat substitutes, Beyond Meat has seen positive momentum from its robust product lineup, largely fueled by its emphasis on innovation. Along with expanding its product offerings, the company is capitalizing on efforts to enhance its distribution network.
With a fast-growing market, a broadened product portfolio and favorable industry dynamics, Beyond Meat appears well-positioned for future success. The Zacks Consensus Estimate for Beyond Meat’s bottom line for the current fiscal year has remained unchanged at a loss of $2.12 per share over the past 30 days. Shares of BYND have declined 22.5% in the past year.
Price and Consensus: BYND
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