At-Home Eating Habit Spurs Packaged Food Sales: 5 Winners

On Jul 23, Unilever plc (UL) said that its second-quarter sales declined less than expected due to a pick up in at-home eating during the coronavirus-led lockdown. Eating at home has become a habit over the past few months given that restaurants and cafes remained closed due to the coronavirus-related shutdown.

This has seen people buying more packaged food and groceries and preparing meals at home, thus helping many retailers survive the pandemic. However, despite states gradually starting to reopen, most are choosing to eat at home instead of visiting restaurants given that the COVID-19 crisis is far from over.

Eat-at-Home Products Save Unilever

Unilever’s sales fell 0.3% in the second quarter, a lot less than it had expected. Underlying sales in North America jumped 7.3% in the first half, with volumes up as much as 20% in some categories. The United States is Unilever’s biggest market by revenues.

Breyers, Magnum and Klondike ice cream, along with Hellmann’s mayonnaise and Knorr soups, were strong performers in food, while Suave beauty products did well in hygiene, the company said. Unilever reported a decline of around 40% in food service sales and nearly 30% in out-of-home ice cream in the first half. However, e-commerce sales were up 49%, with North America witnessing a 177% leap, as more people preferred eating at home. This is one of the primary reasons the company’s sales weren’t affected to the extent that as it had feared.

Packaged Food and Grocery Poised to Grow

The United States saw businesses closed for more than two months. Stay-at-home orders had left people with no choice but to eat at home, which saw them buying everything from groceries to comfort food to packaged food.

According to a new report by Allied Market Research, Packaged Food Market is expected to garner revenues of $3.03 trillion by 2020 at a CAGR of 4.5% between 2015 and 2020. Presently, North America is the highest revenue-generating region in the global market and would continue to maintain its dominant position throughout the analysis period.

Packaged foods include ready meals, baked foods, breakfast cereals, soups, baby food, potato chips, nuts, instant noodles, pasta, biscuits, chocolate confectionary, cheese, yogurt, ice cream, “sauces, dressings & condiments” and non-alcoholic drinks. Although states are reopening and restaurants and cafes are back in business, a surge in coronavirus cases has ignited fears of a second wave. Hence, most will prefer eating at home in the coming months.

Our Choices

Despite the economic impact from the coronavirus pandemic, large segments of the U.S. food and beverage industry have managed to balance losses with gains on the retail side as consumers continue to shift their food and beverage spending from restaurants to stocking groceries at home. It is thus an opportune time to invest in five packaged food stocks.

BG Foods, Inc. BGS manufactures, sells and distributes a portfolio of shelf-stable and frozen foods, and household products in the United States, Canada and Puerto Rico. Its products include frozen and canned vegetables, oatmeal and hot cereals, fruit spreads, canned meats and beans, bagel chips, spices, seasonings, hot sauces, wine vinegars, maple syrups and a range of other products.

The company’s expected earnings growth rate for the current year is 34.2%. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past 60 days. BG Foods carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Sprouts Farmers Market, Inc. SFM offers fresh produce, packaged groceries, meat and seafood, deli, vitamins and supplements, dairy and dairy alternatives, bulk items, baked goods, frozen foods, natural health and body care, beer and wine, and household items. 

The company’s expected earnings growth rate for the current year is 35.2%. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the past 60 days. Sprouts Farmers Market sports a Zacks Rank #1.

Hostess Brands TWNK is a packaged food company that develops, manufactures, markets, sells and distributes fresh sweet baked goods in the United States. 

The company’s expected earnings growth rate for the current year is 9.8%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days. The company has a Zacks Rank #2.

Flowers Foods, Inc. FLO produces and markets packaged bakery products in the United States. It offers fresh breads, buns, rolls, snack cakes, and tortillas, as well as frozen breads and rolls under a range of brand names. 

The company’s expected earnings growth rate for the current year is 14.6%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. Flowers Foods holds a Zacks Rank #2.

The Kraft Heinz Company KHC manufactures and markets food and beverage products in the United States, Canada, the United Kingdom and internationally. Its products include condiments and sauces, cheese and dairy, meals, meats and seafood, frozen and chilled foods, packaged drinking pouches, appetizers, refreshment beverages, coffee, nuts and salted snacks, infant and nutrition products, and other grocery products.

The company’s expected earnings growth rate for next year is 3%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 60 days. The Kraft Heinz Companyhas a Zacks Rank #2.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

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BG Foods, Inc. (BGS): Free Stock Analysis Report

Flowers Foods, Inc. (FLO): Free Stock Analysis Report

Sprouts Farmers Market, Inc. (SFM): Free Stock Analysis Report

The Kraft Heinz Company (KHC): Free Stock Analysis Report

HOSTESS BRANDS (TWNK): Free Stock Analysis Report

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

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