The U.S. administration has sent $1 billion to independent meat and poultry processors. It is part of an effort to break up what the White House is calling a packing monopoly.
According to President Joe Biden, the funds will help tackle a lack of “meaningful competition” in the meat sector. The initiative comes as food market monopoly control by major beef, pork and poultry companies has grown increasingly unchecked.
“Beef retail prices rose 30% from the beginning of 2020, before pandemic lockdowns started, to a peak of $7.90 per pound in October, before declining slightly in November and December,” Reuters reported last week, citing U.S. Department of Agriculture (USDA) data.
The lack of competition leads these businesses to set prices at their discretion with little concern for what it does to suppliers or consumers alike. These funds will have a major impact on meat stocks.
The USDA is giving up to $1 billion to help bolster the independent meat processing sector. “Capitalism without competition isn’t capitalism. It’s exploitation,” Biden said an event on meat industry consolidation. “That’s what we’re seeing in meat and poultry industries now.”
The White House found that the top four meatpackers control a big share of the market in cattle, pigs,and chickens. The total market share for these companies is as much as 85%. The meat industry argue the focus should be on labor shortages.
Consequently, it is a great opportunity to look at some meat stocks that you might want in your portfolio. Investors are getting more and more interested in meat stocks. It is not just because of the rising demand for animal protein but also because of the increased awareness of how meat production impacts the environment.
So, check out these five meat stocks you need to keep an eye on:
- Tyson Foods (NYSE:TSN)
- Pilgrim’s Pride (NASDAQ:PPC)
- Hormel Foods (NYSE:HRL)
- Beyond Meat (NASDAQ:BYND)
- JBS (OTCMKTS:JBSAY)
Meat Stocks: Tyson Foods (TSN)
Tyson Foods is one of the largest food companies in the world — they produce all sorts of meats, prepared foods and more. If you’re looking for a company that produces animal-derived proteins, there’s no better choice than Tyson Foods. The company is one of the leading foodservice distributors in America with an extensive portfolio that includes brands like Tyson, Jimmy Dean, and Hillshire Farm.
The company sold its pet treat branch with General Mills (NYSE:GIS) in 2021. In the meantime, the company has been investing heavily in producing more animal protein for human consumption. Now that it has a singular focus, it can better serve its core customer base. At the same time, it continues to supply General Mills. So, it has not completely washed its hands of the segment. Therefore, the deal will allow them to retain a connection with Tyson Foods while narrowing their focus.
On a separate note, Tyson has expanded into plant-based products with a new brand for the Asia Pacific market. This growth follows the launch of their Raised and Rooted protein line in Europe just last year. It is already available in the United States.
The company outperformed all expectations for its fourth quarter and full-year of 2021. Tyson reported a net income of $1.355 billion for the last quarter. This is an increase from last year when the company reported a figure of $654 million. Tyson reported gains in net income for this year, up 47% from the previous year. Net earnings per share reached $8.34. These positive numbers build on an already impressive track record of TSN stock beating analyst estimates.
Pilgrim’s Pride (PPC)
Pilgrim’s Pride is one of the largest poultry producers in America. They produce from protein processing plants and prepared food facilities worldwide, with their products delivered primarily to retailers or restaurants who serve them up fresh each day. In 2021, PPC bought the meat-heavy business of Kerry Consumer Foods. The acquisition gave them an expanded range and increased profits in their portfolio.
Kerry Meats is the leading manufacturer of branded and private label meat snacks in Ireland and the U.K. They also produce to-go food products for customers all over Europe, including England, which has been their most significant market by far, with an estimated revenue close behind at $200 million per year. The transaction will help improve Pilgrim’s global protein position since they’re gaining access not just into another country but also into two entire regions filled up with quality foods like these.
JBS, the largest meat processing company globally with operations across Brazil and North America, is looking to buy out the remaining stake it does not own in Pilgrim’s Pride. With this purchase, JBSAY would have ownership of one of its key suppliers. It’s also headquartered in the United States, which American laws would fully regulate. That gives it an additional edge when it comes to American investors.
Meat Stocks: Hormel Foods Corp. (HRL)
Hormel Foods is one of the largest manufacturers and marketers of consumer-packaged goods and branded foods in the United States. Hormel Foods produces various products, such as ham, bacon, hot dogs, lunch meats, pepperoni, turkey breast meat, bacon bits and many more.
George A. Hormel founded the company in 1891 after he built up a large herd of hogs. The company has been family-owned since its founding year. Hormel’s grandson became the company’s president in the 1960s, and then his son took over that position until his retirement in the 1990s.
Hormel’s narrative is appealing to investors. With a 2.15% dividend yield and a business with brands like SPAM, Planters & Dinty Moore, it’s a deal that will continue to be appealing to investors in the future. However, they’ve shown great consistency over the years with annual dividend increases of 55 years. Although it might not grab many headlines, it is a solid company with robust fundamentals.
Beyond Meat (BYND)
The trends of people’s hectic lifestyles have been changing to a healthier one. These days, more and more individuals are opting for vegetarianism or veganism as they realize that it can help them stay fit without compromising taste. Consequently, Beyond Meat holds a unique position in the meat industry.
After years of research and development, Beyond Meat has finally created a meat substitute that tastes like the real thing. Their products are available at grocery stores across America for those looking to cut back on their intake.
Its stock cratered 19% after it reported a widening loss for the third quarter. The reasons are higher costs and lower demand from customers who favor meat substitutes over real meats. The company’s financial performance worsened over the past year, with an income statement that showed slightly wider losses. The net loss for the latest quarter came in at a whopping $54.8 million, or 87 cents per share. This compares unfavorably to the net loss of $19.3 million, or 31 cents per share, in the same period last year.
Management didn’t impress BYND stock investors with its guidance for the fourth quarter either. Investors should not expect revenue to bounce back immediately. Beyond Meat expects its Q4 results to be negatively impacted by the operational challenges from this quarter.
Most analysts believe the main challenge for the company is to get costs down. There are several segments of the market it can target. For example, McDonald’s is very competitive in school lunches. They can only tap this market if operational challenges are addressed.
On the bright side, Beyond Meat is benefitting from secular trends. People are eating healthier and are conscious of the environment. Both of these things positively impact Beyond Meat.
Meat Stocks: JBS (JBSAY)
JBS SA is the world’s largest producer of beef and pork and one of the largest chicken processors. Through a subsidiary, the company has a huge market share in America.
Despite challenging conditions, the world’s largest meat company did very well over the last few years. JBS stock profit margins are higher than ever as the company made 7.58 billion reais ($1.8 billion) in the third quarter of fiscal 2021. The company saw major growth in their beef, poultry, and pork sections, making sense considering the Seara unit they operate in Brazil.
The cattle industry is booming in the U.S., with prices for beef on an upswing. livestock markets have been stable, but supply isn’t – which means costs are up, pressuring margins. “Global demand for beef is also very strong, especially in Asia, which accounts for more than 75% of total U.S. beef exports,” according to the company.
JBS said that the Chinese ban on beef imports from Brazil had put pressure on its slaughtering business. The ban on Brazilian beef exports was put in place after cases of mad cow disease were detected in their herds. The company operates in many other countries, so this hasn’t hurt them too badly. Plus, their American subsidiary continues to trade with China, illustrating the importance of this unit. Hence, they can still sell meat to China, just not as much as before. Overall, it’s a huge business with plenty of positives that come with scale.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. You can check out his analysis on InvestorPlace and TipRanks.