Even though we've seen many companies come in below analyst expectations over the last year, there have been plenty of publicly traded organizations that have met or exceeded expectations. Companies that exceed expectations are worthy of further research, so we'll be looking at a number of these companies within the food sector. (For more on analyst expectations, be sure to read Analyst Forecasts Spell Disaster For Some Stocks.)
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A Household Name
Heinz (NYSE:HNZ), famous for its ketchup and Ore-Ida french fries, generated 55 cents per share in the period that ended April 29, its fourth quarter. The 55 cents per share was in line with expectations, but Heinz exceeded expectations in the three quarters before that, which is an accomplishment.
This isn't the only thing about the company worth talking about. It's also important to look at the longevity of the company (it's been around more than 100 years and is known worldwide) as well as its very popular products, two of which were mentioned above.
Going forward, I think that the company will continue to do well on the earnings front, particularly if people continue to eat at home, and I believe that sooner or later the company will get the respect it deserves. Right now I think the stock would be more fairly valued in the $40s.
Waiting On Wall Street
ConAgra (NYSE:CAG) beat expectations in its third quarter, earning 40 cents a share excluding items, and that was four cents better than expected. The company also edged ahead of expectations in the previous three quarters.
The company, which is known for its tasty Slim Jim and Hebrew National brands, among others, also trades at what I'd call a very reasonable 12 times the current 2010 estimate.
Interested investors should note that this morning the company is due out with its fourth-quarter numbers. Wall Street is expecting 42 cents, but I think the company has a solid shot of turning in earnings north of that estimate.
Exceeding Expectations
Del Monte (NYSE:DLM), probably one of the most recognizable names in food, came out with its fourth-quarter numbers earlier this month and it beat expectations.
That's not the only thing that grabs my attention about the company, as it is also planning a bump up in its dividend from four to five cents. Del Monte trades at about 11.5 times this year's estimate of 79 cents and is expected to grow at 7% per annum in the next five years, which adds additional good news to this already promising company.
Dean Foods (NYSE:DF): This Dallas-based company beat expectations by 10 cents per share in the first quarter. It also beat expectations in the quarter before that. Of course, whether or not it will be able to run passed expectations going forward has yet to be seen, but I'm optimistic.
Like the other companies mentioned, it has a big name and it has some big products under its belt. Also, the company is expected to grow at a more than 10% clip per annum in the next five years.
Bottom Line
Food companies have done a pretty good job meeting and/or exceeding expectations. I also think that as a whole they are a good value on a price-to-expected earnings basis. Though all of the companies mentioned are tempting, the long history and solid track record for Heinz makes it stand out. (If you look at food stocks as a defensive play, learn more by reading Guarding Your Portfolio With Defensive Stocks.)
