During the summer months, demand for food and beverages increases as people spend more time outdoors and on vacation. This results in increased sales and revenue for food companies. However, only the best food stocks can benefit from this trend. With the first half of 2024 fast approaching, now is the time to reevaluate where to allocate your capital for the remainder of the year.
For investors, finding the best food stocks to buy to grow their portfolio can be a challenge. Food stocks offer attractive prospects as their “defensive” nature provides stable income even in volatile markets.
The Federal Reserve has signaled it will cut interest rates later this year, and U.S. consumer data is trending toward growth, so a slowdown in the economy this summer is unlikely. All investments involve risk, but food stocks offer an opportunity for attractive returns along with safety.
June could be an ideal month to buy food stocks with quality prospects. For a balanced portfolio, we've identified the top three food stocks expected to outperform to buy in June 2024. Here's why:
Lifeway Foods (LWY)
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LifeWay Foods (NASDAQ:LWY) is the largest kefir producer and leading supplier of fermented probiotic products in the U.S. With growing consumer interest in gut and digestive health and the global probiotics market predicted to reach $73.8 billion by 2024, LifeWay is well positioned for growth.
The company recently endorsed a study suggesting that its flagship product, LifeWay Kefir, may positively alter and support the gut microbiome in children with ADHD, potentially impacting both gut and mental health.
Lifeway recently reported record financial results for the first quarter of 2024, with net sales increasing 17.8% year over year due to increased kefir volume sales, marking the company's 18th consecutive quarter of growth and helping to boost gross margins to 25.8%.
Analysts are keeping a close eye on LWY. The stock has fallen sharply from a high of $28.61 in May and is forecast to decline 6% in 2024. However, it still trades at 83% higher than last year, and diluted EPS was 167% over the same period, suggesting there is significant catch-up potential. Analyst price targets suggest a 90% upside from current levels.
Darden Restaurants (DRI)
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Darden Restaurants (NYSE:DRI) is one of the largest casual dining operators in the United States, with more than 1,800 restaurants across the U.S. It owns Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen and Yard House. In its latest earnings, the company reported a 6.8% increase in total sales, driven by the addition of new restaurants.
The restaurant operator boasts a solid track record of double-digit margins and growth. Excluding transaction costs, adjusted diluted EPS rose 12% to $2.62 in the most recent earnings. The company also reinstated its dividend, which it had temporarily suspended during the pandemic, and launched a new $1 billion share repurchase program, signaling confidence in future growth.
The company's stock price has risen more than 80% from its March 2020 lows, but its P/E ratio remains reasonable at 17.24. If the trend of reopenings continues and sales recover more quickly than expected in the company's June 20 earnings report, the stock price could have room to rise. Sales are expected to grow 7.8% year over year to $2.98 billion, and any shortfall in sales would likely put pressure on the stock price.
Analysts are forecasting a 15% upside from current levels, making DRI stock an attractive option for investors looking for quality dividend-paying restaurant stocks to buy in June.
Ingredion Inc. (INGR)
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Ingredion (NYSE:INGR) is a leading global ingredient solutions provider, supplying critical ingredients to meet ever-changing consumer demands. We target fast-growing specialty food ingredients such as plant-based proteins, recently expanded natural sweeteners and clean-label starches. These trending categories offer opportunities for above-average revenue and margin growth over the long term.
The company reported first-quarter earnings with adjusted EPS increasing 13% and EBIT margin at 11.22%. Despite facing headwinds from foreign exchange impacts and the sale of its Korean business, the company expects operating profit to increase in the low-to-mid single digits and raised its full-year 2024 guidance. ROCE increased to 23.79% from 15.18% last quarter.
INGR shares are attractively valued at a P/E of just 11.52, compared to the industry's P/E of 18.23. For investors looking for exposure to the stable food ingredients industry, analysts' price targets project an upside of 12% for this high-quality dividend-yielding company.
As of the date of publication, Stavros Tousios did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com's publication guidelines.
Stavros Tousios, MBA, is the Founder and Chief Analyst at Markets Untold. With expertise in FX, Macro, Equity Analysis and Investment Advisory, Stavros provides strategic guidance and valuable insights to investors.
