The food distribution industry has gained traction since the onset of the COVID-19 pandemic as online ordering, grocery delivery, and take-outs have become the norm. Most consumers have turned to digital platforms to order food and groceries within their locales to comply with the social distancing and lockdown mandates over the last two years. And the market size of the global online food delivery sector is expected to grow to $223.7 billion through 2027, growing at a 11.4% CAGR.
Given the convenience of online ordering, approximately 64% of consumers do not plan to return to their pre-pandemic dining habits in restaurants. Furthermore, home deliveries and take-outs typically cost less than eating at restaurants. As food price inflation hovers near record highs, the trend of ordering in will likely continue for some time.
Given this backdrop, we think it could be wise to invest in quality food distribution stocks Sysco Corporation (SYY), SpartanNash Company (SPTN), The Andersons, Inc. (ANDE), and HF Foods Group Inc. (HFFG) in the current quarter.
Sysco Corporation (SYY)
SYY in Houston, Tex., distributes food and related products primarily to the food service or food-away-from-home industry. It operates through four segments: U.S. Foodservice; International Foodservice; SYGMA; and Other. The company serves restaurants, healthcare and educational facilities, lodging establishments, and other customers who prepare meals away from home.
On February 14, SYY acquired The Coastal Companies. The acquisition will operate as a part of FreshPoint, to strengthen Mid-Atlantic services and diversify its portfolio.
On January 5, SYY entered five new partnerships with the following groups: IN; National LGBT Chamber of Commerce (NGLCC); National Veteran-Owned Business Association (NaVOBA); The National Minority Supplier Development Council (NMSDC); and Women’s Business Enterprise National Council (WBENC) to enhance supplier diversity initiatives. This strategic move should significantly boost the company’s sales in the near term.
In its second quarter ended Jan. 1, 2022, SYY’s net sales increased 41.2% year-over-year to $16.32 billion. Its operating income increased 109.8% from its year-ago value to $444.91 million, while its net earnings grew 148.8% year-over-year to $167.44 billion. The company’s EPS came in at $0.33, representing a 153.8% year-over-year improvement.
Analysts expect SYY’s revenues to increase 34.2% year-over-year to $15.86 billion in its fiscal third quarter (ended March 2022). Its EPS is expected to increase 150.9% from the same period last year to $0.55 in the about-to-be-reported quarter.
The stock has gained 5.7% in price year-to-date, closing yesterday’s trading session at $83.04.
SYY’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
SYY has a B grade for Growth and Value. Within the Food Makers industry, it is ranked #12 of 85 stocks.
To see additional POWR Ratings for Momentum, Sentiment, Stability, and Quality for SYY, click here.
SpartanNash Company (SPTN)
SPTN in Grand Rapids, Mich., distributes and retails grocery products operating through three segments: Food Distribution; Military; and Retail. It also supplies private brand items under the ‘Our Family’ brand name. The company serves the United States, the District of Columbia, Europe, Cuba, Puerto Rico, Honduras, Iraq, Kuwait, Bahrain, Qatar, and Djibouti.
On March 2, SPTN increased its quarterly cash dividend to $0.21 per common share, representing a 5% increase year-over-year. It was paid on March 31, 2022. This reflects the company’s improved performance.
On February 8, SPTN expanded its partnership with Flashfood by adding 44 Family Fare and VG's Grocery store locations throughout Michigan, Iowa, and Nebraska. With this expansion, SPTN should further reduce food waste and provide affordable access to healthy nutrition for its new customers.
On January 25, SPTN announced the extension of its distribution footprint in California through its partnership with Coastal Pacific Food Distributors, Inc. "In the past year, we have made significant progress implementing our network optimization plan, and those efforts have already driven notable productivity improvements while also enabling us to better meet our customers' evolving demands," stated SPTN Senior Vice President and Chief Supply Chain Officer, Dave Petko.
SPTN’s operating earnings increased 91.6% year-over-year to $33.35 million in its fiscal fourth quarter (ended Jan. 1, 2022). Its net earnings grew 83.9% from its year-ago value to $22.25 million, while the company’s EPS increased 82.4% from its year-ago value to $0.62.
The $0.64 consensus EPS estimate for its fiscal first quarter (ended March 31, 2022) represents a 13.6% improvement year-over-year. The $2.69 billion consensus revenue estimate for the to-be-reported quarter represents a 1.3% increase from the same period last year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 66% in price over the past year to close the last trading session at $32.86.
According to our POWR Ratings, SPTN has a B grade for Value. The stock is ranked #26 of 85 stocks in the Food Makers industry.
Click here to see the other ratings of SPTN for Quality, Sentiment, Momentum, Stability, and Growth.
The Andersons, Inc. (ANDE)
ANDE is a diversified agriculture company that conducts business across the North American agricultural supply chain. The Maumee, Ohio, company operates through three segments: Trade; Renewables; and Plant Nutrient.
On February 19, ANDE announced an $0.18 per share second-quarter cash dividend, payable on April 22, 2022. Since its listing, this is the company’s 102nd consecutive quarterly cash dividend payout.
During its fiscal year 2021 fourth quarter (ended Dec. 31, 2021), ANDE’s sales increased 50.8% year-over-year to $3.78 billion. Its net income rose 89.6% from its year-ago value to $32.8 million. Its adjusted EBITDA grew 82.5% from the same period last year to $130.5 million, while its EPS came in at $0.95, representing an 82.7% increase year-over-year.
Analysts expect ANDE’s revenue for its fiscal first quarter (ended March 31, 2022) to come in at $2.75 billion, representing 4.2% year-over-year growth. The Street expects the company’s EPS to increase 5.9% year-over-year to $0.48 in the to-be-reported quarter. It has surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past year, the stock has gained 79.6% in price to close yesterday’s trading session at $50.20.
ANDE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. ANDE also has a B grade for Growth, Value, and Sentiment. The stock is ranked #20 of 85 stocks in the Food Makers industry.
Click here to see the other ratings of ANDE for Stability, Momentum, and Quality.
HF Foods Group Inc. (HFFG)
HFFG specializes in the distribution of food services to Asian restaurants located in the Southeastern, Pacific, and West Mountain regions of the United States. It offers Asian specialty food items, meat and poultry, seafood, fresh produce, packaging and other items, and commodities. The company is headquartered in Greensboro, N.C.
On January 4, HFFG acquired the leading seafood supplier Great Wall Group. The acquisition effectively doubles HFFG’s distribution network to over 40 states, serving more than 12,500 restaurants. The company’s revenue is expected to cross $1 billion in 2022.
HFFG’s net revenue increased 54% year-over-year to $215.54 million in the third quarter, ended Sept. 30, 2021. Its gross profit grew 66.6% from its year-ago value to $41.91 million, while its net income (after-tax) improved by 2,168.1% year-over-year to $8.21 million over the period. Its adjusted EBITDA increased 190.9% from its year-ago value to $17.38 million.
HFFG stock has gained 7.5% in price over the past month.
HFFG’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. It also has an A grade for Growth and a B grade for Value. Also, it is ranked #9 of 85 stocks in the Food Makers industry.
In addition to the POWR Ratings grades I have just highlighted, one can see the HFFG’s ratings for Momentum, Sentiment, Stability, and Quality here.
Note that HFFG is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
SYY shares were trading at $83.02 per share on Thursday afternoon, down $0.02 (-0.02%). Year-to-date, SYY has gained 6.92%, versus a -6.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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