No visit to the grocery store is complete without the essentials like eggs and bread. The two stocks listed in this article are –
The listed stocks have exhibited the following characteristics: Positive Revenue Growth (Last Qtr vs. Same Qtr), Positive Revenue Growth (3 years), Positive Cash Flow Growth (3 years), Positive Free Cash Flow, Positive Net Income Per Employee. These characteristics were used to filter and identity the listed stocks.
Note- The author does not maintain any positions in the stocks listed in this article.
Cal-Maine Foods (NASDAQ: CALM)
Headquartered in Jackson, Missouri, sits an egg producer who has returned approximately 1800% since 1997 compared to around 430% by the S&P 500. With customers such as Walmart & Sam’s Club, HE Butt Co., Publix Super Markets, Wakefern, Aldi, Kroger, Costco, and others, Cal-Maine Foods (NASDAQ: CALM) provides the retailers the product to stock their dairy coolers. According to the company, “In fiscal 2020, we sold approximately 1,069 million dozen shell eggs, which we believe represented approximately 19% of domestic shell egg consumption“. The next time you pick up an Egg-Land’s Best or Land O’ Lakes branded eggs; it is convenient to know which company is responsible for the product.
A review of 2018, 2019, and 2020 fiscal reports from Cal-Maine Foods (NASDAQ: CALM) highlights an increase in Dozen Eggs Sold of 0.64%, 0.11%, and 2.91%, respectively, with an average of 23.6% of total sales coming from Specialty eggs over the three years. According to the FDA, organic or free-range eggs grown in cage-free systems are referred to as specialty eggs. Various states have issued laws authorizing the sale of only eggs harvested from cage-free facilities as early as 2022. In response, in their Third Quarter Fiscal 2019 Results, the company announced projects worth $148 million in the company’s Delta (UT), Pittsburg (TX), and Zephyrhills (FL) facilities. In December, the company announced a $40.1 million capital project in Guthrie (KY). Cal-Maine Foods (NASDAQ: CALM) appears to be a malleable operator in a highly consolidated industry, transitioning to changing times and tastes.
The chart reflects egg production data as tracked by the National Agricultural Statistical Service. An observation identified is the uptrend in egg production. A possible explanation can be the growing population and eggs serving as an affordable and cheap source of protein. Click here to look at the average price of Eggs, Grade A, across the United States. Moreover, the company provides an overview of its various sustainability efforts in their Sustainability Report, such as adopting energy-efficient LED lighting at facilities, domestically sourcing feed, and investment of $4.8 million to reduce greenhouse emission by 90 tons/year, and others. Such efforts show that the company understands the critical role in the overall ecosystem and highlights an urgency to become a sustainable operation.
Flowers Foods Inc (NYSE: FLO)
A sandwich is a sandwich because of the bread. The makers of Dave’s Killer Bread, Nature’s Own, Canyon Bakehouse, Wonder, and others had performed exceptionally well market since 1987. The company has returned approximately 3300% compared to the around 400% from the S&P 500. In its Consolidated Fourth Quarter Highlights for 2020, sales increased 6.4% in fiscal 2020, of which Branded retail sales, store-branded retail sales, and Non-Retail sales contributed +13.4%, -9.8%, and -13.5%, respectively. The decrease in Store branded sales was due to “volume declines” and “price increases to improve profitability.” For the fiscal year 2019 and 2018, Flowers Foods Inc (NYSE: FLO) reported a branded retail sales increase of approximately +5% and +2%, respectively. Compare that to the +13.4% from 2020; a paradigm shift can be noticed, which could benefit Flowers Foods Inc (NYSE: FLO).
The robust store-branded retail sales number should guide to brand acceptance on a consumer level. For the most part, brands such as Dave’s Killer and Canyon Bakehouse cater to the specific growing set of consumers who want to be aware of the ingredients in the food they consume. For many, awareness directly correlates to health and dietary restrictions, so it is plausible that continued acceptance can be expected.
Consumer Price Index is defined as a “measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services”. Through this data, bread which falls under the cereal and bakery products category overtime has increased.When I think of bread, I think of the standard Peanut Butter & Jelly. A World War Two superstar veteran still serves as a conduit for many families as a quick and easy way to provide a nutritious offering. Expenditures in Cereals and bakery products have increased consistently from 1984 to 2017 for the urban population, as reflected from the Consumer Expenditure Survey data published by the Bureau of Labor Statistics. Flowers Foods Inc (NYSE: FLO) is positioned to continue delivering results with its broad and niche selection of offerings. Even with reports of a departure from high population centers that have surfaced, it is worth thinking that the urban center’s amenities will follow their patrons in some form or another.