May 11th, 2022

What’s For Dinner?

Do you remember the old ad slogan, “Beef. It’s what’s for dinner!”?  Well, that may not be the case in the second half of 2022.  While consumer demand for meat has been rising the last few years, retail prices for beef increased by more than 20% from 2019 to 2021.  During the last 12 months, the cost of beef increased an additional 16%.  There’s always two sides to every story, so if beef is falling out of favor, what will be the protein of choice?  

As people start reducing discretionary spending, consumers will likely begin to “trade down” when deciding which protein to purchase.  The USDA is expecting a fall in beef consumption from 2022-23 and chicken is poised to be the benefactor.  

Looking back around the 2008-09 time frame, whole chicken sales grew by 22% and the volume of chicken eaten grew by nearly 21%.  Other, value-oriented parts of chicken grew even more.  Chicken wings experienced a 109% increase during that same period.  Mind you, the cost of chicken also increased, but it was still cheaper than beef.

Here are two companies that are already seeing an increase in sales and are projecting increases in revenue through the end of the year.

Tyson Foods (TSN) is the biggest US meat company by sales and recently reported second-quarter fiscal 2022 revenues of $13.12 billion, beating expectations of $12.43 billion.  After their earnings report, they raised revenue targets through the rest of the year.  Tyson is up 4% so far this year.

There’s another chicken producer that is a little more interesting though.

Pilgrim’s Pride Corporation (PPC) produces nearly one out of every five chickens sold in the US.  It has an P/E ratio of 32.94, but a Forward P/E ratio of 9.22, indicating it is trading at a discount.  While the market has been in a state of turmoil the last month, PPC has gained 8.40%, and is a low-beta stock at 0.95.  There’s resistance around the $29.50 level, but if PPC can break through, it could retest $33 and then potentially $37.  

If you have any questions, comments, or anything we can help with, reach us at any time.

Jeff
Guest Writer, Filthy Rich, Dirt Poor
Editor, Wealthy Investor Society