Which Top 5 Food Stock has the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

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Here’s your Cheat Sheet to how the top 5 food stocks rank via earnings trends:

Dean Foods Co. (NYSE:DF): Current Price $16.34

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 12,360 11,110 12,120 13,060 11,460
Diluted EPS ($) 1.20 1.38 0.50 -8.59 0.90

Between 2009 and 2011, Dean Foods improved sales every year but profits crashed into the negative. However, EPS in 2012 returned to the black.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 3,296 3,214 3,126 3,143 3,041
Diluted EPS ($) -0.06 0.20 0.30 0.20 0.20

The quarterly numbers from the company are uninspiring with sales and EPS essentially flat over the last four quarters. We’ll look elsewhere…

ConAgra Foods, Inc. (NYSE:CAG): Current Price $33.73

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 11,250 12,350 12,010 12,300 13,260
Diluted EPS ($) 1.90 2.15 1.37 1.88 1.12

ConAgra’s annual sales have increased steadily after 2010, though EPS was down during 2012.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Nov. 30, 2011 Feb. 29, 2012 May. 31, 2012 Aug. 31, 2012 Nov. 30, 2012
Revenue ($) in millions 3,432 3,373 3,352 3,312 3,736
Diluted EPS ($) 0.43 0.65 -0.18 0.61 0.51

We note that EPS has turned around after that disastrous quarter in May 2012, but has fallen off again in the latest quarter. We’ll reject ConAgra too…

The J. M. Smucker (NYSE:SJM): Current Price $92.40

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 2,525 3,758 4,605 4,826 5,526
Diluted EPS ($) 3.00 3.11 4.15 4.05 4.06

We are impressed with the sales growth at J. M. Smucker these years, though EPS has been essentially flat between 2010 and 2012.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Oct. 31, 2011 Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012
Revenue ($) in millions 1,514 1,468 1,355 1,370 1,629
Diluted EPS ($) 1.12 1.03 0.93 1.00 1.36

We like that the October 2012 quarter has seen a turnaround in both revenue and EPS. We’ll keep J M Smucker on our list for now…

Ralcorp Holdings Inc. (NYSE:RAH): Current Price $0.00

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 2,824 2,821 3,061 3,787 4,322
Diluted EPS ($) 5.38 5.09 3.74 -4.32 1.31

We see solid sales growth at RalCorp between 2008 and 2012, though profits slid during that period.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 990.40 1,166 1,062 1,026 1,067
Diluted EPS ($) -7.60 1.16 0.40 0.53 -0.78

However, we drop RalCorp from the reckoning because its September quarter EPS turned negative.

Hormel Foods Corp. (NYSE:HRL): Current Price $36.08

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 6,755 6,534 7,221 7,895 8,231
Diluted EPS ($) 1.04 1.27 1.46 1.74 1.86

Hormel Foods has shown commendable growth in revenue and EPS these past five years.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Oct. 31, 2011 Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012
Revenue ($) in millions 2,104 2,039 2,013 2,008 2,170
Diluted EPS ($) 0.43 0.48 0.48 0.41 0.49

We also see that sales and EPS improved nicely in the last quarter there. Here’s a strong contender…

Conclusion

In this “E-Squared” investment analysis of food stocks, Hormel Foods walks away with the honors because of its superior overall numbers compared to those of J M Smucker.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!