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 Performance Food Group Company (NYSE:PFGC) 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 friendly grocery store team stocking shelves with foodservice products.
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.
Overall, PFGC ranks 5th on our list of best beef stocks to buy now. While we acknowledge the potential for PFGC 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.
