We recently published a list of 7 Best Beef Stocks to Buy Now. In this article, we are going to take a look at where Albertsons Companies, Inc. (NYSE:ACI) stands against other best beef stocks to buy now.
Global Beef Market
The beef industry encompasses various activities, including cattle farming, meat processing, distribution, and retail. The global beef market size was valued at $436.60 billion in 2023. It is projected to grow from $459.87 billion in 2024 to $656 billion by 2032, exhibiting a CAGR of 5.52%, according to Fortune Business Insights. The demand for protein, particularly sourced from animals, has consistently been high because of high global meat consumption.
According to OECD-FAO Agricultural Outlook (2021-2030), the global consumption of meat proteins is projected to grow 14% by 2030. In recent years, the demand for branded products has increased significantly. With the increase in disposable income, the market has seen substantial growth in demand for premium, high-quality beef, labeled as Certified Angus Beef, USDA Choice, USDA Natural, and others.
Consumers today are more health conscious, seeking nutritious, low-calorie foods which has significantly impacted the beef market. Moreover, people are becoming increasingly aware of the health risks associated with meat products containing growth-enhancing hormones. This is driving the demand for natural meat products. Analysts predict the global organic beef market will surge from $18.79 billion in 2024 to $31.28 billion by 2031, according to Research and Markets.
The beef industry’s activity has been high in the first half of 2024. Australia, one of the biggest players in the industry, saw its production soaring, with weekly cattle slaughter numbers around 140,000 heads, which is 20% higher than the five-year average. Furthermore, the country’s beef exports reached an all-time high of 129,998 metric tons, according to Newshub. However, the rising inflation is impacting the overall beef consumption. In Argentina, beef consumption is down by 16% this year so far, mainly driven by 300% inflation in the country.
U.S. Beef Market
The beef industry plays an important role in the United States, both economically and culturally. As a key part of the agriculture sector, the industry has a substantial impact on the country’s economy. The United States is one of the largest producers of beef, with a well-established cattle industry. As reported in our previous article on the 10 best beef stocks to buy, Angus, Hereford, and Holstein are notable breeds of cattle raised in the various regions of the United States.
As such, the U.S. beef industry is projected to grow from $108.14 billion in 2024 to $157.36 billion in 2032, according to Fortune Business Insights. Despite minor fluctuations, overall U.S. beef production has remained stable over the past years. As of November 2023, total fresh beef sales were reported at $31 billion for the trailing twelve-month period.
The U.S. beef industry faces a shrinking cattle supply, with the smallest herd since 1951. Moreover, the decline in replacement heifers is also signaling a slowdown in the herd contraction. The continued marketing of heifers has been a major factor in the contraction of cattle inventory. All U.S. beef cattle inventory reached 28.2 million head, as of January 2024. This is a reduction of 2%, or 700,000 heads, on a YoY basis. This trend is driven by drought and high input costs, which have compelled farmers to market more heifers than usual. Yet, the smaller reduction in replacement heifers indicates that herd contraction will slow down.
Nevertheless, the number of cattle on feed remains elevated, which is up by 2% from 2023. This means the current demand is being met as of now, keeping beef prices stable. However, the smaller calf crop and declining replacement heifers indicate supply disruptions in the future. Furthermore, the beef price will go up significantly in late 2024 and 2025 due to potential supply shortages. As of July 2024, the price of all fresh beef already hit $8 per pound – an all-time high.
With this, let’s now move to our list of 7 Best Beef Stocks to Buy Now.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small-cap and large-cap stocks every quarter and has delivered a 275% return since May 2014, beating its benchmark by 150 percentage points (see more details here).
A fresh produce section in a modern grocery store.
Albertsons Companies, Inc. (NYSE:ACI)
Number of Hedge Funds Holders: 59
Next stock in the list of 7 best beef stocks is Albertsons Companies, Inc. (NYSE:ACI) which operates food and drug stores across the United States. It also manufactures and processes food products, including beef steaks, beef whole cuts, and ground beef. Notable brands in the product portfolio include Albertsons, Safeway, and Tom Thumb.
In July 2024, the company expanded its beef offerings by bringing in Godshall’s beef bacon in its California, Colorado, and Southwest stores. This aligns with the Albertsons’ strategy to offer a wide range of high-quality meats. In addition to beef bacon, it has also brought in Godshall’s turkey bacon, which offers a healthier alternative to pork bacon.
Albertsons Companies, Inc. (NYSE:ACI) generated $24.3 billion in revenue in the first quarter of 2024. This represents an increase from $24.1 billion on a YoY basis. The increase was primarily driven by the company’s 1.4% increase in identical sales. Higher pharmacy sales contributed to the growth in identical sales. The company also reported a 23% growth in digital sales during the first quarter.
With increased sales, the gross profit margin rose to 27.8%. However, the selling and administrative expenses also increased to 25.9% of net sales during the first quarter. This increase was due to higher operating expenses for the ongoing development of digital and omnichannel capabilities, third-party security services, and increased store occupancy costs. This was partially offset by the benefits of productivity initiatives.
Interest expenses fell to $145.7 million in the first quarter of fiscal 2024, down from $154.9 in the same period of fiscal 2023. This decrease was due to reduced average outstanding borrowings. Therefore, Albertsons Companies, Inc. (NYSE:ACI) was able to earn a quarterly net income of $391.6 million.
The company announced a merger plan with The Kroger Co. in early 2024. According to the plan, Kroger Company will acquire all outstanding shares of Albertsons. The merger is now facing trial due to concerns about its impact on competition in the grocery industry. Thus, investors should watch closely to see if the deal gets finalized or falls through.
Nevertheless, 59 hedge funds have invested $4.2 billion in Albertsons Companies, Inc. (NYSE:ACI) as of Insider Monkey’s database of Q2 2024. Also, the stock carries an upside potential of 31%, according to six analysts’ predictions.
Overall, ACI ranks 1st on our list of best beef stocks to buy now. While we acknowledge the potential for ACI to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.