We recently published a list of 7 Best Beef Stocks to Buy Now. In this article, we are going to take a look at where Kraft Heinz Co (NASDAQ:KHC) stands against other 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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A closeup of an assembly line worker inspecting a newly produced jar of condiments and sauces.
The Kraft Heinz Company (NASDAQ:KHC)
Number of Hedge Funds Holders: 43
The Kraft Heinz Company (NASDAQ:KHC) manufactures and markets food and beverage products across North America and other international markets. The company’s wide product portfolio includes meat products, dairy products, and other grocery products. The company sells products through both its own sales channels and independent brokers and agents. Some of the meat-related products include veggie burgers made from soy protein, chicken patties made from soy, and vegan burgers made in a way that mimics the taste of beef.
The company debuted two plant-based meat products including Hot Dogs and Sausages in March 2024. According to Markets and Markets, the global plant-based meat market is expected to grow from $7.9 billion in 2022 to $15.7 billion in 2027.
In Q2 2024, net sales for Kraft Heinz Co (NASDAQ:KHC) declined by 3.6%, compared to the same period last year, reaching $6.5 billion. Prices increased by 1% in North America and emerging markets, which was partially offset by lower prices in developed international markets.
The company’s operating income decreased by 62.1% compared to the same period last year, dropping to $0.5 billion. This decline was mainly driven by non-cash impairment losses of $854 million during the current year. In contrast, adjusted operating income rose by 2% compared to the prior year, reaching $1.4 billion. This increase was mainly the result of cost savings, lower commodity costs, and higher pricing.
Kraft Heinz Co (NASDAQ:KHC) reported an adjusted EPS (earnings per share) of $0.78 in the second quarter. The net cash provided by operating activities was $1.7 billion, an 8.1% increase compared to the same period last year. The increase was primarily due to favorable improvements in working capital and higher adjusted operating income. Additionally, the company has paid $969 million in cash dividends so far this year, maintaining shareholder confidence.
Despite the decline in sales, the management is optimistic about gradual top-line improvement in the second half of 2024.
According to CEO Carlos Abrams-Rivera:
“As we enter the second half of 2024, many drivers are giving us optimism for improved top-line trends. We are anticipating a continued ramp-up of both innovation and renovation, particularly in North American retail. We are also increasing our marketing investment to continue to drive brand superiority across our portfolio.”
At the end of Q2 2024, 43 hedge funds in Insider Monkey’s database made a total investment of $11.01 billion in Kraft Heinz Co (NASDAQ:KHC), placing it among the top 7 beef stocks to buy.
Overall, KHC ranks 4th on our list of best beef stocks to buy now. While we acknowledge the potential for KHC to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.