The rising consumer demand for protein-rich products, driven by a growing emphasis on health and wellness, has created favorable conditions for the Zacks Food – Meat Products industry. Companies in this space have adapted to these trends by broadening their product portfolios, increasing production capacity and investing in plant-based meat alternatives.
Despite challenges, including higher input costs and increased operational expenses, Tyson Foods, Inc. TSN, Pilgrim's Pride Corporation PPC and Beyond Meat, Inc. BYND remain well-positioned for growth, supported by their strategic initiatives and ability to keep pace with shifting consumer preferences.
About the Industry
The Zacks Food – Meat Products industry comprises companies that manufacture, process, market, distribute and sell a wide range of meat products like chicken, pork, beef, prepared food and plant-based meats. Some companies also offer poultry and turkey products, alongside providing nutritional food products and supplements, desserts and drink mixes and industrial gelatin products. Most companies offer their products to retail and foodservice customers, while some cater to deli and commercial operators, including grocery retailers, grocery wholesalers, meat distributors, warehouse club stores, industrial food processing companies, chain restaurants, international export companies, school cafeterias and hospitals, among others. Some products offered include frozen whole chicken, primary pork cuts, salads, sandwiches and meatballs.
Major Trends Shaping the Future of the Meat Food Industry
Increasing Protein Demand & the Rise of Plant-Based Alternatives: The growing popularity of protein-rich diets is driving growth for meat companies, prompting them to continuously innovate their product lines. This trend is fueled by heightened health awareness, particularly among fitness enthusiasts adopting high-protein regimens such as the keto diet. At the same time, the demand for plant-based meat alternatives is gaining traction as consumers increasingly favor fresher, healthier options over traditional meat products. These alternatives are appreciated for their minimal use of artificial ingredients and additives, making them a more wholesome choice. Industry experts believe that plant-based protein could significantly disrupt the traditional meat industry, positioning itself as a formidable contender in the broader protein market.
Strategic Expansions: Companies in the meat industry are strengthening their market presence by diversifying product offerings and executing strategic growth initiatives, such as mergers, acquisitions and capacity expansions. To enhance production capabilities, many are investing in new facilities, upgrading existing plants and forming partnerships with co-manufacturers. Several companies are also investing in automation and advanced technology to accelerate digital transformation and streamline operations. Some companies are focusing on expanding into international markets, where they are seeing favorable outcomes and strong growth potential.
Rising Cost Challenges: Elevated input costs continue to pose significant challenges for meat producers. Escalating prices for feed, raw materials, transportation and labor have driven up production expenses. Persistent inflationary pressures, combined with higher operational costs, remain a headwind to maintaining healthy profit margins.
Zacks Industry Rank Indicates Robust Prospects
The Zacks Food – Meat Products industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #13, which places it in the top 5% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates strong near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since the beginning of October 2024, the industry’s earnings estimate for the current and next fiscal year earnings has jumped 3.3% and 0.4%, respectively.
Given the industry’s solid prospects, we present a few stocks that you may want to consider for your portfolio. However, before that, it’s worth taking a look at the industry’s performance and current valuation.
Industry vs. Broader Market
The Zacks Food – Meat Products industry has outperformed the broader Zacks Consumer Staples sector while trailing behind the S&P 500 over the past year.
The industry has risen 14.7% over this period compared with the broader sector’s jump of 2.1%. Meanwhile, the S&P 500 has witnessed a surge of 25.6%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing Consumer Staple stocks, the industry is currently trading at 15.17X compared with the S&P 500’s 22.21X and the sector’s 16.99X.
Over the past five years, the industry has traded as high as 21.76X and as low as 12.24X, with the median being 16.67X, as the chart below shows.
Price-to-Earnings Ratio (Past Five Years)
3 Meat Food Stocks to Keep a Close Eye On
Tyson Foods: This Zacks Rank #1 (Strong Buy) company remains a powerhouse in the protein segment, offering a wide range of chicken, beef and pork products. TSN’s strategic initiatives, including automation and supply-chain optimization, have helped it navigate challenging market conditions. Tyson Foods has also made significant strides in expanding its value-added and prepared foods segments. These efforts, combined with its sustainability initiatives and international expansion plans, position the company for long-term growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TSN’s current fiscal year earnings per share (EPS) has risen from $3.26 to $3.51 over the past 60 days. Tyson Foods has a trailing four-quarter earnings surprise of roughly 57%, on average. Shares of TSN have rallied 11.3% in the past year.
Price and Consensus: TSN
Pilgrim’s Pride: The company’s strategic focus on operational efficiency and cost management, along with its robust distribution channels, sets it up for continued success. Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen, and value-added chicken and pork products, benefits from its diverse product offerings and solid foothold in the foodservice and retail sectors. This Zacks Rank #2 (Buy) company has also been investing in automation and technology, driving improvements in processing efficiency and product quality.
The Zacks Consensus Estimate for PPC’s current fiscal year EPS has risen from $4.79 to $5.12 over the past 60 days. Pilgrim's Pride has a trailing four-quarter earnings surprise of 30.9%, on average. Shares of the company have surged 71% over the past year.
Price and Consensus: PPC
Beyond Meat: Rising consumer demand for healthier, sustainable and ethically produced foods has been a key driver for this Zacks Rank #3 (Hold) company. As a producer, marketer and seller of plant-based meat substitutes, Beyond Meat benefits from its robust product lineup, largely fueled by its emphasis on innovation. Along with expanding its product offerings, the company is capitalizing on efforts to enhance its distribution network.
With a fast-growing market, a broadened product portfolio and favorable industry dynamics, Beyond Meat appears well-positioned for future success. The Zacks Consensus Estimate for BYND’s bottom line for the current fiscal year has improved from a loss of $2.12 per share to a loss of $2.09 over the past 60 days. Shares of BYND have declined 60.4% in the past year.
Price and Consensus: BYND
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