In this piece, we are going to look at the 9 Best Pizza Stocks to Buy Now (pizza, cheese, and flour Stocks).
How’s the Pizza Market Doing?
Originating from Italy hundreds of years ago, and spreading across the globe like wildfire ever since, pizza has always been the consumers’ go-to food option, and hence, its market is growing to date. As such, as reported in one of our articles on best pizza stocks to buy, the pizza market is set to experience a CAGR of 4.45% during the period 2024-2032, growing from $148.6 billion in 2023 to $222.5 billion by 2032. Similarly, the frozen pizza segment is also expected to increase during the period 2023-2028, gathering a market size of $5.96 billion during the period, showcasing a CAGR of 4.96%.
The popularity of pizza can be judged from the statistics showing that there are 245,000 pizza restaurants in the world, and around 77,000 restaurants within the U.S. The U.S. itself experienced record-high pizza sales of $46.9 billion in 2022, thanks to over 7,000 units opening up in the eight years up till 2022. This reinforces the fact that the largest pizza chains in the world are based in the U.S. Pizza Hut, one of the biggest pizza brands in the world, is the oldest one, which was founded back in 1958 in Kansas, USA.
What’s Cooking in the Industry?
Within the frozen pizza segment, meat toppings dominate the market as it has a share of 56% in sales, while vegetable toppings have a share of 26%. In contrast, cheese toppings are also competing nicely, as it has a 14% share, as reported by media.market.us. DiGiorno, Red Baron, and Totino’s Party Pizza are the top frozen pizza brands with the greatest brand awareness.
The recent trends in the pizza market include rising demand for vegan pizzas (frozen or otherwise); this evolving market of pizza has got is on a roll, as new demands keep popping up for cheese substitutes, all sorts of pepperoni, Mexican style meats like Birria and chorizo, and new topping varieties
What’s new in the industry is the rapid acceleration of technology use in the context of operators, as a survey shows that 748 pizza makers in the U.S. find online ordering the new go-to way of consuming pizzas and that 78.21% of the producers are investing in a great deal to up their brand presence across the internet. The optimism is on the high side as well amongst the pizza makers as most believe in sales growth in the next twelve months.
Thus, certainly, the pizza market is one to grow indefinitely (or at least it should), and hence, to capitalize on this growth, one must know the best pizza stock to buy. So, let’s move on to our list of 9 Best Pizza Stocks to Buy Now.
A family gathering around a delivery pizza box in the comfort of their own home.
Methodology
To curate our list of 9 Best Pizza Stocks to Buy Now, we gathered a list of all companies with a significant presence in the pizza industry and related industries of cheese and flour. We then further narrowed them down on the basis of various metrics like institutional ownership, the number of analysts watching the stock, and the overall financial health of respective stocks. We ranked the finest remaining companies by the number of hedge funds that had stake in them as of Q2, 2024.
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9. The Chefs’ Warehouse, Inc. (NASDAQ:CHEF)
Number of Hedge Fund Holders: 18
Upside Potential: 30.92%
Based in the U.S., The Chefs’ Warehouse, Inc. (NASDAQ:CHEF) is a distributor of specialty food categories like cheese, unique oils, cooking oil, butter, chocolate, milk, flour, cut beef, and hormone-free poultry, just to name a few.
The Chefs’ Warehouse, Inc. (NASDAQ:CHEF)’s second quarter of 2024 was marked by robust operational efficiency bringing recovery to the operations. The company’s revenue saw an uptick of 8.3% on a YoY basis, hitting $954.7 million. This was a result of a 7.2% increase in organic sales, and a further 1% uptick coming through acquisitions. Furthermore, the company’s effective pricing strategies and expansion of its customer base helped it bag a 7.5% increase in specialty sales. Gross profit climbed 9.9% to $229 million, achieving a margin of 24%. Operating profit also climbed from $25.3 million to $33.9 million, on a YoY basis.
The growth of the company is commendable over the years, as it has expanded its distribution capacity by 60% since 2019, tapping into markets of UAE, Washington, California, and Florida. According to the company, it is well on track to generating a revenue of $4.6-$5 billion, and an adjusted EBITDA in the range of $300 million to $350 million. These ambitious goals can be demonstrated through the company’s successful installation of a protein processing center in Northern California already, and its plan of full consolidation of processing and distribution operations in Brisbane.
As a result of this showcasing of continued growth over the years, analysts are predicting a 3% growth in the company’s revenue in 2024, expecting it to hit $3.8 billion. The analysts are also predicting a 21% increase in the earnings. Thus, based on these forecasts, the analysts are translating this growth into the stock’s appreciation which they expect to be 30.9%; this forecast is given out by a consensus of seven analysts.
Lastly, 18 hedge funds are bullish on the stock as of Q2 2024, which is an increase by two from the prior quarter.
8. Papa John’s International, Inc. (NASDAQ:PZZA)
Number of Hedge Fund Holders: 21
Upside Potential: 8.80%
Next on our list of 9 Best Pizza Stocks to Buy Now, we have Papa John’s International, Inc. (NASDAQ:PZZA), which was founded in 1984 – almost 4 decades ago. It is the 5th largest pizza chains in the U.S. having more than 5,000 units across the globe.
Papa John’s International, Inc. (NASDAQ:PZZA) experienced a decrease of 1.3% in its revenue for Q2 2024. This decrease was attributed to an $8.8 million decrease in the company’s North American commissary revenue, amidst lower sales volumes and prices. The adjusted operating income of the company increased by 4% to $38.4 million due to marketing strategies playing out well, and domestic company-owned restaurants bringing improved margins. As a result, adjusted diluted earnings per share (EPS) increased from $0.59 per share in the same quarter of 2023 to $0.61.
However, free cash flow saw a drastic decrease in the quarter, which is something to worry about, as it fell to $12.8 million in the quarter from $58 million in Q2 2023. While the CAPEX for the quarter was lower, the unfavorable working capital changes and income taxes’ cash payments were the primary reasons for this state of being low on cash. But, not to worry, as the company points towards its cash and borrowing balance worth $260 million under its revolving credit facility.
Papa John’s gives out operating income full-year guidance figure of somewhere between $135-$155 million, the higher end of which would mean a growth of 5.4%. Thus, on the back of 15 analysts, the stock is expected to experience price appreciation of 8.8%. Understandably then, hedge funds are also consistently bullish on the stock, with investments worth $64 million by 21 hedge fund holders put into the stock, as of Q2 2024.
7. The Cheesecake Factory Incorporated (NYSE:CAKE)
Number of Hedge Fund Holders: 22
Upside Potential: 12.90%
Next we have The Cheesecake Factory Incorporated (NYSE:CAKE), which although known for its cheesecakes, also makes flatbread pizzas. The company is based in the U.S. and owns over 340 restaurants across the U.S. and Canada.
The Cheesecake Factory Incorporated (NYSE:CAKE) demonstrated a robust performance in the 2nd quarter of 2024, surpassing expectations. The revenue climbed to the higher end of the projected range, hitting $904 million. In addition to this, the operational efficiency of the company in the quarter enabled it to record a 24% YoY growth in its adjusted earnings per share.
The comparable sales experienced an uptick of 1.4%, which was better than the overall casual dining sector, achieving record-high average weekly sales on the way as well. On top of that, the Cheesecake Factory recently opened a restaurant in Utah, which experienced a great deal of demand. The robust performance of the company in the quarter was also marked by efficient cost management and higher labor productivity that led to its 17.7% 4-wall margin, which was the highest in six years.
This performance is set to continue in the coming quarters, as the company expects 22 new units to be opened in 2024, with 11 having already opened so far, with one unit getting successfully launched in Asia, signifying the growing market expansion of the brand.
Going forward, the analysts are seeing a revenue figure of $3.58 billion in 2024, which would be a 2.3% YoY growth. On the other hand, EPS is also expected to be higher than 2023 levels in the coming two quarters, amounting to $0.5 per share and $0.9 per share in the third and fourth quarters, respectively. The debt position of the company, which is consistently hovering around $470 million, could be a factor that investors could dig into, however, the liquidity of the company seems to be alright considering that it has a free cash flow of $277 million, additional cash balance of $41 million, and $237 million on the revolving credit facility.
Nonetheless, 15 analysts are seeing a 12.9% upside of the stock, supported by 22 hedge fund holders being bullish on the stock, as of Q2 2024.
6. Bunge Global SA (NYSE:BG)
Number of Hedge Fund Holders: 26
Upside Potential: 19.78%
Bunge Global SA (NYSE:BG) operates across four segments: Milling, Agribusiness, refined and specialty oils, sugar, and bioenergy. The agribusiness and food company offers raw materials for the pizza industry, providing flour for processing purposes.
Bunge Global SA (NYSE:BG) experienced a mixed performance in Q2 2024, in which the earnings per share (EPS) took a huge dip, falling from $4.1 per share in Q2 2023 to $0.5 per share in Q2 2024. Bunge attributed this fall to various one-time adjustments pertaining to mark-to-market timing differences, and transaction and integration costs relating to business combination with Viterra. Nevertheless, the adjusted EPS of $1.74 in the quarter was still a decrease from $3.7 in Q2 2023.
While the company’s agribusiness segment experienced a decline in North and South American, and Asian regions, the refined and specialty oils segment performed better than expected, and is expected to perform above expectations.
It was also notable that the lower ethanol prices affected the company’s non-core sugar and bioenergy joint ventures.
The growth prospects of the company have expanded in the recent past, thanks to continued expansion across different segments. Bunge is stressing largely on greenfield projects, with forecasted capex to be in the range of $1.2-$1.4 billion. The company’s strategic investments consist of the acquisition of CJ Selecta, which makes soy-based products, and the acquisition of an oil refinery in Avondale, La.
As of Q2, 2024, 26 hedge fund holders are bullish on the stock, and 11 analysts are seeing a price appreciation of roughly 20%. Hence, the stock makes it into our list of 9 Best Pizza Stocks to Buy Now.
5. Yum! Brands, Inc. (NYSE:YUM)
Number of Hedge Fund Holders: 36
Upside Potential: 7.07%
Yum! Brands, Inc. (NYSE:YUM) is the parent company of Pizza Hut, the second largest pizza chain in the US.
The stock has the eyes of institutional investors, as it has 88% institutional ownership as of Q2 2024, showcasing the stock’s popularity with Wall Street. Furthermore, based on an analyst count of 22, the stock’s upside comes out to be 7.07%. The analysts further expect a growth in the company’s EPS, as compared to 2023 levels; they expect it to increase from $5.2 per share to $5.65 per share in 2024, and $6.3 per share in 2025 – growth of 8.65% and 21.2% in the respective forecasted years.
Moreover, 24 analysts predict the company’s revenue will grow to $7.62 billion and $8.2 billion in 2024 and 2025, respectively, from recorded revenue of $7.1 billion in the full year 2023. That’s quite a sweet forecast for the stock; however, now we will look into why the stock’s going in a positive direction in the eyes of analysts.
First, let’s have a look at the company’s numbers for Q2 2024: Yum! Brands saw quarterly profitability growth as their system sales grew by 3% and core operating profit grew by 10%, thanks to increased market share grabbed by Taco Bell US, and decent unit growth observed at KFC International. The improved profitability was also a result of the company’s cost-reduction strategies working fine, resulting in a G&A expenses reduction of 9% year-over-year.
On the other hand, the Pizza Hut segment, which has a 14% share in the company’s operating profit, showed a mixed performance during the quarter. Although the system sales stayed constant and international same-store sales dropped by 4%, there’s an uplifting momentum in the U.S., Thailand, and Hong Kong. The company is further expanding its customer engagement of Pizza Hut Segment, as it has now stepped into the burger industry with the new Cheeseburger Melt, as announced in May 2024.
The company’s deployment of an AI-enabled restaurant management system, Dragontail is expected to be rolled out in all of the US systems of Pizza Hut, which the company believes will result in an increase of 7% in customer satisfaction. And to spice things up for pizza lovers, Pizza Hut has announced extensive development of its menu in June 2024, disclosing new upcoming toppings such as Spicy Marinara Sauce, Pesto Sauce Swirl, Chicken Sausage, Fresh Diced Garlic, Grape Tomatoes, Caramelized Onions, Fire-Roasted Peppers and Crispy Cupped Pepperoni.
The growth of the company in the coming time is inevitable, as the financial standing as of Q2 2024 end is going strong, enabling the company to open up 894 units in the quarter alone, which is the highest number of openings in any 2nd quarter of the company’s history, translating to a 5% YoY unit growth. The company’s strategic investments will continue to drive its growth in the coming time as they are investing in technology to improve food quality and customer satisfaction. Furthermore, the 10,000 units milestone is set to be achieved by the company relating to its KFC segment.
The growth prospects of the Yum! Brands will further be bolstered by the company’s acquisition of 216 KFC restaurants in the UK and Ireland, which it is optimizing as of now, and will soon be translating into greater revenue and profitability. And let’s not forget that the Middle East conflict has had its share of impact on the company’s profitability in the last two quarters, and it expects to recover from it in the rest of the year and beyond, as it plans to reopen many of its units in the region that are temporarily closed as of now.
With cash and cash equivalents standing at $520 million, up by 19% from the same quarter of 2023, with the expansion plans set out for the shorter run, and with the adoption of high-end AI technology, the company’s upside of roughly 7% seems to be quite on the touching distance, especially given the fact that recovery from Middle eastern conflict is set to happen.