The 21-month-long rally of U.S. stock markets has shown no signs of weakening. September is historically the worst-performing month on Wall Street. But is year, with just five trading days left, major indexes are trading in the green month to date. Intermittent volatility, however, may appear due to weak economic data, earnings results below expectation or unforeseen geopolitical conflicts.
In this regard, the inclusion of some defensive stocks from the food industry will safeguard your portfolio if the market rally pauses temporarily. The last couple of years were marked by inflation, which not only lifted input costs for manufacturers but also weighed on consumers’ purchasing power, thereby affecting sales volumes of the food space. However, an effective combination of a strong brand presence and a strategic pricing approach has empowered these companies to navigate the volatile economic landscape.
Here we recommend four food stocks, namely, The Chefs' Warehouse Inc. CHEF, Nomad Foods Ltd. NOMD, Lifeway Foods Inc. LWAY and Laird Superfood Inc. LSF. These stocks have strong price upside potential in the short-term. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Near-Term Positives for Food Industry
Companies in this space have been benefiting from robust pricing strategies implemented to weather the economic storm. Brand strength has been another major upside. Consumers’ loyalty to specific brands, combined with companies' unwavering focus on innovation, has been a driving force.
For instance, companies have been responding well to the growing consumer preference for healthy and nutritious food by introducing innovations in the organic product sector. The focus on expanding plant-based alternatives has particularly benefited companies offering meat products, which remain a significant component of consumers' shopping carts.
Apart from this, endeavors to enhance manufacturing capabilities and strengthen product portfolios have proven successful for numerous food companies, positioning them favorably for future growth. Their ability to adapt to evolving consumer preferences and market dynamics has emerged as a winning formula.
4 Food Stocks With Strong Potential to Buy
These four food stocks have strong price upside left in the short-term.
The chart below shows the price performance of our four picks in the past three months.
Zacks Investment Research
Image Source: Zacks Investment Research
The Chefs' Warehouse Inc.
Zacks Rank #1 The Chefs' Warehouse is a distributor of specialty food products in the United States. CHEF is focused on serving the specific needs of chefs who own and operate restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools and specialty food stores.
CHEF’s product portfolio includes artisan charcuterie, specialty cheeses, unique oils and vinegars, hormone-free protein, truffles, caviar, and chocolate. CHEF also offers cooking oils, butter, eggs, milk, and flour.
Impressive Price Upside Potential for CHEF Shares
The Chefs' Warehouse has an expected revenue and earnings growth rate of 9.7% and 12.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.4% over the last 60 days. In the short term, the stock price has a 22.5% upside from the current average target price of $49. The brokerage target price is currently in the range of $44-$51.
Nomad Foods Ltd.
Zacks Rank #2 Nomad Foods manufactures and distributes frozen foods primarily in the United Kingdom, Italy, Germany, Sweden, France and Norway. NOMD’s portfolio of frozen food brands includes Birds Eye, Iglo and Findus.
NOMD also provides meal products that include ready-to-cook noodles, pasta, lasagna, pancakes, and other ready-made meals, ice creams, such as in-home and out-of-home ice creams; and other products consisting of soups, pizzas, bakery goods, and meat substitutes.
Excellent Price Upside Potential for NOMD Stock
Nomad Foods has an expected revenue and earnings growth rate of 4.3% and 12.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 30 days. In the short term, the stock price has a 27.3% upside from the current average target price of $24.17. The brokerage target price is currently in the range of $21-$28.
Lifeway Foods Inc.
Zacks Rank #1 Lifeway Foods produces and markets probiotic-based products in the United States and internationally. LWAY’s primary product is a drinkable kefir, a cultured dairy product in various organic and non-organic sizes, flavors, and types.
LWAY offers European-style soft cheeses, cream and other products, ProBugs, a line of kefir products designed for children, drinkable yogurt; and fresh made butter and sour cream. LWAY sells its products under the Lifeway, GlenOaks Farms, and Fresh Made brand names, as well as under private labels on behalf of customers primarily through a direct sales force, brokers, and distributors.
LWAY Stock Offers Huge Price Upside Potential
Lifeway Foods has an expected revenue and earnings growth rate of 24.7% and 32%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 23.8% over the last 60 days. In the short term, the stock price has a 23.3% upside from the current average target price of $26.50. The brokerage target price is currently in the range of $25-$28.
Laird Superfood Inc.
Zacks Rank #2 Laird Superfood manufactures and markets plant-based natural and functional food in the United States. LSF offers its products through its e-commerce channels, including lairdsuperfood.com and pickybars.com, and third-party platforms and marketplaces.
LSF provides powdered and liquid coffee creamers, and hydration and beverage enhancing supplements, hydrating coconut water products, performance mushroom supplements, functional, organic roasted, and instant coffee, tea, hot chocolate products, harvest snacks, and other food items.
Solid Price Upside Potential for LSF Shares
Laird Superfood has an expected revenue and earnings growth rate of 21.6% and 85.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 37.5% over the last 60 days. In the short term, the stock price has a 14.5% upside from the current average target price of $4.75. The brokerage target price is currently in the range of $3.5-$6.
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