During the summer months, demand for food and beverages increases as people spend more time outside and on vacations. This results in increased sales and revenue for food companies. However, only the best food stocks can benefit from this trend. With the first half of 2024 approaching, it’s time to reevaluate where to allocate capital for the remainder of the year.
Finding the best food stocks to buy to grow your portfolio is challenging as an investor. Food stocks present attractive prospects as they provide steady returns even in volatile markets due to their “defensive” nature.
The Federal Reserve has signaled an interest rate cut in the year’s second half, and U.S. consumer data leans toward growth. So, it is unlikely the economy will slow this summer. While all investments carry risks, food stocks provide an opportunity for attractive returns with a side of security.
June might just be an ideal month to buy food stocks with high-quality prospects. For a balanced portfolio, we’ve identified the top three food stocks to buy in June 2024 that are poised to outperform. And here’s why:
Lifeway Foods (LWY)
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Lifeway Foods (NASDAQ:LWY) is the largest producer of kefir in the U.S. and a leading supplier of fermented probiotic products. With consumer interest in gut and digestive health on the rise and the global probiotics market estimated to reach $73.8 billion by 2024, Lifeway is well-positioned for growth.
The company recently endorsed a study that suggests its flagship Lifeway kefir can positively alter the gut microbiome in children with ADHD, support it and lead to gut and mental health benefits.
Lifeway recently reported record results for the first quarter of 2024, with net sales increasing 17.8% year-on-year (YOY) due to higher kefir volumes. This marked the company’s 18th consecutive quarter of growth, which helped increase gross profit margins to 25.8%.
Analysts are taking note of LWY as the stock trades 6% lower in 2024 after plunging from a high of $28.61 in May. However, it still trades 83% higher compared to last year, while diluted EPS stands at 167% for the same period. This suggests a substantial catch-up may be on the cards. Analyst price targets show a 90% upside from current levels.
Darden Restaurants (DRI)
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Darden Restaurants (NYSE:DRI) is one of the largest casual dining operators in the U.S., with more than 1,800 restaurants nationwide. It owns Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen and Yard House. Its latest earnings showed total sales increasing 6.8%, driven by the addition of new restaurants.
The restaurant operator has a solid track record of double-digit margins and growth. Excluding transaction costs, adjusted diluted net EPS increased 12% to $2.62 in its last earnings. The company also reinstated its dividend after temporarily suspending it during the pandemic and launched a new $1 billion share repurchase program, signaling confidence in its future growth.
While the stock has rallied over 80% from its March 2020 lows, it still trades at a reasonable P/E of 17.24x. This leaves room for upside if the reopening trend continues and sales rebound faster than expected in its June 20 earnings. Revenues are expected to increase 7.8% YOY to $2.98 billion, with an estimate miss likely to weigh on the stock.
Analysts expect a 15% upside from current levels, making DRI stock a compelling choice for investors looking for a high-quality, dividend-paying restaurant stock to buy in June.
Ingredion Inc (INGR)
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Ingredion Inc (NYSE:INGR) is a leading global ingredient solutions provider that supplies essential ingredients that cater to ever-evolving consumer demands. It targets high-growth specialty food ingredients, including plant-based proteins, recently expanded natural sweeteners, and clean-label starches. These on-trend categories provide opportunities for above-average sales and margin growth over the long term.
The company reported an adjusted EPS increase of 13% in its first-quarter earnings, with an EBIT margin of 11.22%. Despite facing headwinds from foreign exchange impacts and the divestiture of its South Korean business, the company anticipates operating income to be up low to mid-single digits and raised its full-year 2024 guidance. ROCE increased to 23.79% from 15.18% in the quarter before last.
At a P/E of just 11.52x, INGR stock is attractively valued relative to the industry’s P/E of 18.23x. For investors seeking exposure to the steady food ingredients industry, analyst price targets forecast a 12% upside for this high-quality dividend yield payer.
On the date of publication, Stavros Tousios 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.
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