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 Sysco Corporation (NYSE:SYY) 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 butcher shop showcasing fresh meats and seafood for customers.
Sysco Corporation (NYSE:SYY)
Number of Hedge Funds Holders: 37
Next on the list of 7 best beef stocks to buy is Sysco Corporation (NYSE:SYY), which is engaged in the marketing and distribution of food and related products. It operates through its U.S. and international food service segments, as well as a few other divisions. The product portfolio of the company includes frozen items, fruits, vegetables, and dairy products. In the non-food segment, Sysco supplies paper products, restaurant equipment, and cleaning supplies. Based in Texas, it serves schools, hotels, restaurants, industrial caterers, and other food service venues.
For Q4 2024, Sysco Corporation (NYSE:SYY) reported an EPS of $1.39. This surpassed analysts’ expectations of $1.38 per share. The company reported quarterly net sales of $20.56 billion. Despite a drop in food traffic, Sysco increased its quarterly volume by 3.5% by capturing market share, exceeding the growth target. This was supported by the company’s initiative to relocate its Asian food operations to the newly opened Allentown, Pennsylvania distribution center. The aim was to strengthen Sysco’s presence in the Northeast’s expanding Asian market.
The annual top-line revenue reached $79 billion for the fiscal year, marking a 3.3% growth compared to fiscal year 2023. SYGMA, a Sysco sub-brand and key supplier of fresh beef to restaurants, reported a 5% increase in case volume from Q3 to Q4. The growth was driven by new profitable contracts and positive year-over-year performance.
It also reported a 4.2% growth in gross profit on a year-over-year basis. This was possible because of the merchant team, which delivered a strong performance with strategic sourcing and product innovation. The corporate expenses decreased by 10% on a year-over-year basis. This was due to efficiencies achieved in the previous quarter.
The company ended the year with $11.3 billion in net debt and $3.5 million in total liquidity, which provided a significant cushion above the company’s minimum threshold. Moreover, the debt position of the company is strong, with no maturity above $1 billion until 2027. Sysco Corporation (NYSE:SYY) generated $3 billion in operating cash flow and $2.2 billion in free cash flow during the fiscal year. The strong financial position enabled it to declare a quarterly cash dividend of $0.51.
Sysco is expecting an adjusted EPS growth of 6% to 7% in the upcoming fiscal year. This growth is in line with the company’s earnings guidance. However, EPS growth is expected to be impacted by non-operational factors, including a higher tax rate and increased interest expenses.
The company’s robust performance in the year so far has also driven its share price upwards by 8% on a YTD basis. As such, 37 hedge funds tracked by Insider Monkey have invested a total of $884.3 million in Sysco Corporation. Furthermore, 13 analysts are anticipating a 7.2% upside growth of the stock.
Overall, SYY ranks 6th on our list of best beef stocks to buy now. While we acknowledge the potential for SYY 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.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.