In this article, we will look at the 7 Best Beef Stocks to Buy Now.
Global Beef Market
The beef industry encompasses various activities, including cattle farming, meat processing, distribution, and retail. The global beef market size was valued at $436.60 billion in 2023. It is projected to grow from $459.87 billion in 2024 to $656 billion by 2032, exhibiting a CAGR of 5.52%, according to Fortune Business Insights. The demand for protein, particularly sourced from animals, has consistently been high because of high global meat consumption.
According to OECD-FAO Agricultural Outlook (2021-2030), the global consumption of meat proteins is projected to grow 14% by 2030. In recent years, the demand for branded products has increased significantly. With the increase in disposable income, the market has seen substantial growth in demand for premium, high-quality beef, labeled as Certified Angus Beef, USDA Choice, USDA Natural, and others.
Consumers today are more health conscious, seeking nutritious, low-calorie foods which has significantly impacted the beef market. Moreover, people are becoming increasingly aware of the health risks associated with meat products containing growth-enhancing hormones. This is driving the demand for natural meat products. Analysts predict the global organic beef market will surge from $18.79 billion in 2024 to $31.28 billion by 2031, according to Research and Markets.
The beef industry’s activity has been high in the first half of 2024. Australia, one of the biggest players in the industry, saw its production soaring, with weekly cattle slaughter numbers around 140,000 heads, which is 20% higher than the five-year average. Furthermore, the country’s beef exports reached an all-time high of 129,998 metric tons, according to Newshub. However, the rising inflation is impacting the overall beef consumption. In Argentina, beef consumption is down by 16% this year so far, mainly driven by 300% inflation in the country.
U.S. Beef Market
The beef industry plays an important role in the United States, both economically and culturally. As a key part of the agriculture sector, the industry has a substantial impact on the country’s economy. The United States is one of the largest producers of beef, with a well-established cattle industry. As reported in our previous article on the 10 best beef stocks to buy, Angus, Hereford, and Holstein are notable breeds of cattle raised in the various regions of the United States.
As such, the U.S. beef industry is projected to grow from $108.14 billion in 2024 to $157.36 billion in 2032, according to Fortune Business Insights. Despite minor fluctuations, overall U.S. beef production has remained stable over the past years. As of November 2023, total fresh beef sales were reported at $31 billion for the trailing twelve-month period.
The U.S. beef industry faces a shrinking cattle supply, with the smallest herd since 1951. Moreover, the decline in replacement heifers is also signaling a slowdown in the herd contraction. The continued marketing of heifers has been a major factor in the contraction of cattle inventory. All U.S. beef cattle inventory reached 28.2 million head, as of January 2024. This is a reduction of 2%, or 700,000 heads, on a YoY basis. This trend is driven by drought and high input costs, which have compelled farmers to market more heifers than usual. Yet, the smaller reduction in replacement heifers indicates that herd contraction will slow down.
Nevertheless, the number of cattle on feed remains elevated, which is up by 2% from 2023. This means the current demand is being met as of now, keeping beef prices stable. However, the smaller calf crop and declining replacement heifers indicate supply disruptions in the future. Furthermore, the beef price will go up significantly in late 2024 and 2025 due to potential supply shortages. As of July 2024, the price of all fresh beef already hit $8 per pound – an all-time high.
With this, let’s now move to our list of 7 Best Beef Stocks to Buy Now.
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Methodology:
For this list, we scanned Insider Monkey’s database of 920 hedge funds as of Q2 2024 and selected companies involved in the beef industry, covering areas such as processing, distributing, cattle ranching, and meatpacking. From that group, we picked 7 companies with strong balance sheets and solid financials and ranked them in ascending order of hedge funds having stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small-cap and large-cap stocks every quarter and has delivered a 275% return since May 2014, beating its benchmark by 150 percentage points (see more details here).
7. Hormel Foods Corporation (NYSE:HRL)
Number of Hedge Funds Holders: 31
Hormel Foods Corporation (NYSE:HRL) develops, processes, and distributes various meats, nuts, and other food products. It delivers these products to retail, deli, food service, and commercial customers in the United States and internationally. The company provides different items including fresh meats, frozen items, refrigerated meal solutions, nutritional food supplements, and several other products. Notable brands in its portfolio include Applegate Naturals, Herbivorous Butcher, and Happy Little Plants.
Hormel Foods Corporation (NYSE:HRL) reported quarterly sales of $2.9 billion in Q2 2024. Increased sales were driven by products like snack nuts, lean ground turkey, premium sliced lunchmeat, and guacamole. The volume and net sales growth were primarily driven by strong performance in bacon and premium prepared proteins.
However, Hormel Foods Corporation (NYSE:HRL) struggled in the turkey segment due to lower volumes and reduced prices for whole-bird turkeys, which impacted its earnings. The company’s retail segment has been hampered by the uncertain consumer sentiment and pressure from whole bird turkey dynamics. The retail component of the company witnessed a 29 million pounds decline in sales, of which two-thirds was the result of sluggish sales across whole bird turkeys. This also had an adverse impact on the value-added meats vertical segment. The company expects the earnings pressure, inflicted by this setback, to continue.
Nevertheless, the company reported a 3% increase in gross profit in the second quarter, primarily due to supply chain movements and gains from modernization efforts. Along with gross profit, the gross profit margins increased by 90 basis points to 17.4% in the second quarter.
Hormel Foods Corporation (NYSE:HRL) reported an increase in operating cash flow during the first half of the year due to higher interest income. As a result, year-to-date cash flow from operations amounted to $640 million. It also declared the 383rd consecutive quarterly dividend at a rate of $1.13 per share. However, the company is expecting adjusted earnings diluted per share for the third quarter to be lower than the second quarter. The major factors are ongoing challenges with whole turkey and disruptions in Suffolk production.
In addition to dividend payments, Hormel Foods Corporation (NYSE:HRL) invested $60 million in capital projects during the second quarter. The largest projects of the quarter included investment in a new order for the cash system and packaging projects for planters. Moreover, it ended the quarter with $1.5 billion in cash, which it will use to pay off its $950 million note.
In the recent Global Impact Report, the company announced that it reduced product packaging by 1.7 million pounds by optimizing packaging design and improving shipping efficiencies.
In light of the financial results and strategic decisions of Hormel Foods Corporation (NYSE:HRL), 31 hedge funds have invested $713.9 million in the company at the end of Q2 2024, as per Insider Monkey’s database, placing it among the top 7 beef stocks to buy.
6. Sysco Corporation (NYSE:SYY)
Number of Hedge Funds Holders: 37
Next on the list of 7 best beef stocks to buy is Sysco Corporation (NYSE:SYY), which is engaged in the marketing and distribution of food and related products. It operates through its U.S. and international food service segments, as well as a few other divisions. The product portfolio of the company includes frozen items, fruits, vegetables, and dairy products. In the non-food segment, Sysco supplies paper products, restaurant equipment, and cleaning supplies. Based in Texas, it serves schools, hotels, restaurants, industrial caterers, and other food service venues.
For Q4 2024, Sysco Corporation (NYSE:SYY) reported an EPS of $1.39. This surpassed analysts’ expectations of $1.38 per share. The company reported quarterly net sales of $20.56 billion. Despite a drop in food traffic, Sysco increased its quarterly volume by 3.5% by capturing market share, exceeding the growth target. This was supported by the company’s initiative to relocate its Asian food operations to the newly opened Allentown, Pennsylvania distribution center. The aim was to strengthen Sysco’s presence in the Northeast’s expanding Asian market.
The annual top-line revenue reached $79 billion for the fiscal year, marking a 3.3% growth compared to fiscal year 2023. SYGMA, a Sysco sub-brand and key supplier of fresh beef to restaurants, reported a 5% increase in case volume from Q3 to Q4. The growth was driven by new profitable contracts and positive year-over-year performance.
It also reported a 4.2% growth in gross profit on a year-over-year basis. This was possible because of the merchant team, which delivered a strong performance with strategic sourcing and product innovation. The corporate expenses decreased by 10% on a year-over-year basis. This was due to efficiencies achieved in the previous quarter.
The company ended the year with $11.3 billion in net debt and $3.5 million in total liquidity, which provided a significant cushion above the company’s minimum threshold. Moreover, the debt position of the company is strong, with no maturity above $1 billion until 2027. Sysco Corporation (NYSE:SYY) generated $3 billion in operating cash flow and $2.2 billion in free cash flow during the fiscal year. The strong financial position enabled it to declare a quarterly cash dividend of $0.51.
Sysco is expecting an adjusted EPS growth of 6% to 7% in the upcoming fiscal year. This growth is in line with the company’s earnings guidance. However, EPS growth is expected to be impacted by non-operational factors, including a higher tax rate and increased interest expenses.
The company’s robust performance in the year so far has also driven its share price upwards by 8% on a YTD basis. As such, 37 hedge funds tracked by Insider Monkey have invested a total of $884.3 million in Sysco Corporation. Furthermore, 13 analysts are anticipating a 7.2% upside growth of the stock.
5. Performance Food Group Company (NYSE:PFGC)
Number of Hedge Funds Holders: 42
Performance Food Group Company (NYSE:PFGC) engages in the marketing and distribution of food and food-related products in North America. It operates through three segments: Foodservice, Vistar, and Convenience. The company offers beef, pork, poultry, and seafood. It also offers frozen foods, refrigerated products, and dry groceries. Additionally, the company provides value-added services for product selection and operational strategies.
The total case (unit of packaged goods) volume increased by 1.1% in the fourth quarter of fiscal 2024 compared to the same period the previous year. The total organic case volumes grew due to a 3.7% rise in organic independent cases, a surge in performance brand cases, and an increase in cases sold to Foodservice’s chain. Net sales grew 2.2% to $15.2 billion compared to the prior year period. The increase was mainly on account of case volume growth in the independent Foodservice business as well as recent acquisitions. Moreover, more than 90% of branded products of beef, pork, and poultry of different Performance Food Group met certification requirements as part of a responsible sourcing program.
Performance Food Group Company (NYSE:PFGC)’s gross profit grew 4.7% to $1.7 billion in the fourth quarter of fiscal 2024. This increase was primarily attributable to growth in the independent channel, performance brands, acquisitions, and optimized procurement efficiencies that reduced the cost of goods sold.
However, the company reported a total cost inflation of 4.7% in the quarter. Management expects the same inflation level to continue in fiscal 2025, affecting consumer purchasing patterns. Thus, investors must keep an eye on the company’s margins in the upcoming quarters.
Performance Food Group Company (NYSE:PFGC) reported a net income of $166.5 million in the quarter, which was up 11% YoY. This was the result of a decrease in the operating expenses. The earnings per share (EPS) also increased by 11.5% to $1.07 per share in the fourth quarter.
In July 2024, it announced the acquisition of Jose Santiago, Inc., a broad-line food distributor in Puerto Rico. The transaction allowed the company to add new geographic territories in the Caribbean with high growth potential. Performance Food Group Company (NYSE:PFGC) has also agreed to acquire Cheney Bros, Inc. for approximately $2.1 billion. The transaction will add geographical locations and resources in the Southeastern United States.
Given its strong financial and strategic position, nine analysts predict an upside potential of 16%. Moreover, 42 hedge funds in Insider Monkey’s database have invested $981 million collectively in the company. Thus, Performance Food Group Company makes it to our list of 7 best beef stocks to buy now.