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The 15-month bull run of U.S. stock markets suffered a surprise setback in April. We believe that April’s meltdown was nothing but a bull market correction this time, a welcome one as Wall Street rebounded in May. Month-to-date, the S&P 500 is up 4%, while the Dow has advanced about 1.1%. The Nasdaq Composite has climbed 7%.

However, market participants remained highly concerned regarding the time and magnitude of interest rate cuts by the Fed. The CME FedWatch assigned a 56% probability that the Fed will cut the benchmark lending rate by 25 basis points in November, and a 77.5% chance that the Fed fund rate will be reduced by 25 basis points in December. The expectation of more than one rate cut is a distant possibility now.

As investors remained concerned about a higher rate for longer, a recent auction of U.S. government bonds by the Treasury Department received weak demand. As a result, yields on different Treasury Securities spiked. The yield on the benchmark 10-Year U.S. Treasury Note touched 4.6%, crossing the technically crucial 4.5% level.

Higher market risk-free interest rates are detrimental to equity markets. This will increase the discount rate thereby reducing the net present value of the stock investment. Further, a higher interest rate will drive up borrowing costs, hurt consumer spending, and make money market funds more attractive.

In this regard, the inclusion of some defensive stocks from the miscellaneous food industry will safeguard your portfolio if the market rally pauses due to internal or external reasons. The food industry exhibited resilience in the face of economic challenges in 2023, and it looks well-placed for this year.

The last couple of years were marked by inflation, which not only lifted input costs for manufacturers, but also weighed on consumers’ purchasing power, thereby affecting sales volumes of the food space. However, an effective combination of a strong brand presence and a strategic pricing approach has empowered these companies to navigate the volatile economic landscape.

Near-Term Positives

Companies in this industry have been benefiting from robust pricing strategies implemented to weather the economic storm. Brand strength has been another major upside. Consumers’ loyalty to specific brands, combined with companies' unwavering focus on innovation, has also been a driving force.

For instance, companies have been responding well to the growing consumer preference for healthy and nutritious food by introducing innovations in the organic product sector. The focus on expanding plant-based alternatives has particularly benefited companies offering meat products, which remain a significant component of consumers' shopping carts.

Apart from this, endeavors to enhance manufacturing capabilities and strengthen product portfolios have proven successful for numerous food companies, positioning them favorably for future growth. Their ability to adapt to evolving consumer preferences and market dynamics has emerged as a winning formula.

The Zacks-defined Consumer Staples – Miscellaneous Food Industry is currently in the top 31% of the Zacks Industry Rank. Since it is ranked in the top half of Zacks Ranked Industries, we expect the consulting services industry to outperform the market over the next three to six months.

Our Top Picks

We have narrowed our search to five miscellaneous food stocks that have strong growth potential for 2024. These stocks have seen positive earnings estimate revision in the last 30 days. Each of our picks boast either a Zacks Rank # 1 (Strong Buy) or 2 (Buy) rating.

The chart below shows the price performance of our five picks year-to-date.

Image Source: Zacks Investment Research

BRF S.A. (BRFS - Free Report)

This company raises, produces, and slaughters poultry and pork for processing, production, and sale of fresh meat, processed products, pasta, margarine, pet food, and other products.

BRF S.A. provides frozen whole and cut chicken, frozen pork, and turkey, and halal products for Islamic markets, processed foods, such as marinated, frozen, seasoned whole, and cut chicken, roosters, sausages, ham products, bologna, frankfurters, salamis, bacon, cold meats, and other smoked products, and hamburgers, steaks, breaded meat products, kibbeh, and meatballs, as well as chicken sausages, hot dogs, and chicken bologna.

BRF S.A. sells its products under the Sadia, Perdigão, Qualy, Sadia Halal, Chester, BRF Ingredients, Kidelli, Perdix, Borella, Hilal, Balance, Onefoods, Banvit, Deline, Sadia Bio, Sadia Salamitos, Sadia Veg&Tal, Sadia Livre&Lev, Sadia Hot Pocket, Perdigão Ouro, Chester Perdigão, Perdigão NaBrasa, Claybom, Biofresh, Three Dogs, Three Cats, and Gran Plus brands. BRFS serves supermarkets, wholesalers, retail and wholesale stores, restaurants, and other institutional buyers.

The Zacks Rank #1 (Strong Buy) stock has an expected revenue and earnings growth rate of 11.7% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 45% over the last 30 days.

Freshpet, Inc. (FRPT - Free Report)

Freshpet, Inc. is a pet food company. Freshpet, Inc. manufactures and markets natural fresh foods, refrigerated meals, and treats for dogs and cats in the United States and Canada. The company sells its products under the Freshpet, Dognation, and Dog Joy brand names.

Freshpet, Inc. provides meat-based recipes, such as chicken, beef, lamb and salmon; fruits and vegetables, such as carrots, peas and leafy green vegetables, and high-fiber grains, such as brown rice, oats and barley.

The Zacks Rank #1 (Strong Buy) stock has an expected revenue and earnings growth rate of 24.8% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 24.1% over the last seven days.

Vital Farms, Inc. (VITL - Free Report)

As a food company, Vital Farms, Inc. provides pasture-raised products in the United States. Vital Farms, Inc. offers shell eggs, butter, hard-boiled eggs, and liquid whole eggs.

The Zacks Rank #1 (Strong Buy) stock has an expected revenue and earnings growth rate of 22.5% and 59.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 22.1% over the last 30 days.

Utz Brands, Inc. (UTZ - Free Report)

This company is engaged in the manufacture, marketing, and distribution of snack foods. It offers a range of salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, pork skins, veggie snacks, pub/party mixes, tortilla chips, salsa and dips, ready-to-eat popcorn, and other snacks under the Utz, Zapp's, ON THE BORDER, Golden Flake, Boulder Canyon, Hawaiian, TORTIYAHS!, brand names.

Utz Brands, Inc. sells its products to wholesale and other distributors, grocery stores, convenience and drug stores, discount stores, mass merchandisers, membership club stores, hard discounters, and specialty and e-commerce retailers.

The Zacks Rank #2 (Buy) stock has an expected revenue and earnings growth rate of 0.1% and 24.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.4% over the last 30 days.

Ingredion Inc. (INGR - Free Report)

Ingredion Inc. is an ingredients solutions provider specializing in nature-based sweeteners, starches, and nutrition ingredients. Ingredion Inc. serves diverse sectors in food, beverage, brewing, pharmaceuticals, and other industries.

The company's sweetener products include dextrose, glucose, polyols, HFCS, and Maltodextrin. Ingredion Inc.'s nutrition solutions include prebiotic fibers, resistant starch, soluble fibers, and Inulin fibers. Its starch-based products include both industrial and food-grade starches.

The Zacks Rank #2 (Buy) stock has an expected revenue and earnings growth rate of 2.5% and 3.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the last 30 days.

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