5 Grocery Store Stocks to Buy for Grilling Season

NEW YORK (TheStreet) -- Burgers, beer and barbecue: Which stocks will benefit as consumers fire up for grilling season?

Lower gas prices compared to 2014 could mean a bump in consumer dollars this summer toward food and grocery bills. But there is fierce competition in the food retail business. Organic grocer Whole Foods (WFM) and others like it are getting a run for their money as more traditional grocery stores and discount retailers like Target (TGT) bulk up their natural foods offering.

Consolidation also continues. This week industry observers wondered how a merger of the world's two biggest operators -- Royal Ahold, which operates Giant food stores in Maryland, Virginia, and Washington, D.C. and Delhaize Group, which operates Food Lion stores -- could affect Kroger (KR), one of the country's largest supermarket chains.

TheStreet Ratings believes a handful of food retail stocks are worthy of buying. Here are five grocery stocks to consider. And when you're done be sure to

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Year-to-date returns are based on May 21, 2015 closing prices.

WFM Chart WFM data by YCharts

1. Whole Foods Market Inc. (WFM)
Market Cap: $15.3 billion
Year-to-date return: -15.6%
Rating: Buy, B

Whole Foods Market, Inc. operates as a retailer of natural and organic foods. The company's stores offer produce and floral, grocery, meat, seafood, bakery, prepared foods and catering, coffee, tea, beer, wine, cheese, nutritional supplements, vitamins, and body care products, as well as lifestyle products, including books, pet products, and household products. As of November 5, 2014, the company had 401 stores in the United States, Canada, and the United Kingdom. Whole Foods Market, Inc. was founded in 1978 and is headquartered in Austin, Texas.

TheStreet said: "We rate WHOLE FOODS MARKET INC (WFM) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 9.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • WHOLE FOODS MARKET INC has improved earnings per share by 15.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WHOLE FOODS MARKET INC increased its bottom line by earning $1.56 versus $1.47 in the prior year. This year, the market expects an improvement in earnings ($1.73 versus $1.56).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Food & Staples Retailing industry average. The net income increased by 12.0% when compared to the same quarter one year prior, going from $142.00 million to $159.00 million.
  • 38.68% is the gross profit margin for WHOLE FOODS MARKET INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 4.35% is above that of the industry average.
  • Net operating cash flow has increased to $322.00 million or 14.18% when compared to the same quarter last year. Despite an increase in cash flow, WHOLE FOODS MARKET INC's average is still marginally south of the industry average growth rate of 20.45%.

 

VLGEA Chart VLGEA data by YCharts

2. Village Super Market Inc. (VLGEA)
Market Cap: $458 million
Year-to-date return: 18.9%
Rating: Buy, B

Village Super Market, Inc., together with its subsidiaries, operates a chain of supermarkets in the United States. Its superstores feature specialty departments, such as onsite bakery, an expanded delicatessen, natural and organic foods, ethnic and international foods, prepared foods, and pharmacies. As of July 26, 2014, it operated 29 supermarkets, including 18 supermarkets in northern New Jersey, 8 supermarkets in southern New Jersey, 2 supermarkets in Maryland, and 1 supermarket in northeastern Pennsylvania under the ShopRite name. Village Super Market, Inc. was founded in 1933 and is based in Springfield, New Jersey.

TheStreet said: "We rate VILLAGE SUPER MARKET (VLGEA) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, compelling growth in net income, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • VLGEA's revenue growth has slightly outpaced the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 4.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 135.00% and other important driving factors, this stock has surged by 28.05% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food & Staples Retailing industry. The net income increased by 134.2% when compared to the same quarter one year prior, rising from $2.82 million to $6.60 million.
  • Net operating cash flow has slightly increased to $35.57 million or 6.80% when compared to the same quarter last year. Despite an increase in cash flow, VILLAGE SUPER MARKET's cash flow growth rate is still lower than the industry average growth rate of 20.45%.
  • VLGEA's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that VLGEA's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.

 

IMKTA Chart IMKTA data by YCharts

3. Ingles Markets Inc. (IMKTA)
Market Cap: $1 billion
Year-to-date return: 38.2%
Rating: Buy, B+

Ingles Markets, Incorporated operates a chain of supermarkets in the southeast United States. The company's supermarkets provide various food products, including grocery, meat and dairy products, produce, frozen foods, and other perishables; and non-food products comprising fuel, pharmacy products, health and beauty care products, and general merchandise, as well as private label items. Its stores also offer home meal replacement items, delicatessens, bakery and floral products, and greeting cards, as well as various selections of organic, beverage, and health-related items. As of September 28, 2014, the company operated 193 supermarkets under the Ingles name and 9 supermarkets under the Sav-Mor name in western North Carolina, western South Carolina, northern Georgia, eastern Tennessee, southwestern Virginia, and northeastern Alabama; 96 in-store pharmacies and 83 fuel centers; and 69 shopping centers. In addition, it engages in the fluid dairy processing and shopping center rental businesses. Ingles Markets, Incorporated was founded in 1963 and is based in Black Mountain, North Carolina.

TheStreet said: "We rate INGLES MARKETS INC (IMKTA) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 54.34% and other important driving factors, this stock has surged by 75.25% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • INGLES MARKETS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, INGLES MARKETS INC increased its bottom line by earning $2.28 versus $0.89 in the prior year. This year, the market expects an improvement in earnings ($2.75 versus $2.28).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food & Staples Retailing industry. The net income increased by 36.8% when compared to the same quarter one year prior, rising from $10.46 million to $14.30 million.
  • Net operating cash flow has significantly increased by 54.59% to $63.73 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.45%.

 

CASY Chart CASY data by YCharts

4. Casey's General Stores Inc. (CASY)
Market Cap: $3.5 billion
Year-to-date return: 0.04%
Rating: Buy, B+

Casey's General Stores, Inc., together with its subsidiaries, operates convenience stores under the Casey's General Store name in 14 Midwestern states, primarily Iowa, Missouri, and Illinois.

TheStreet said: "We rate CASEYS GENERAL STORES INC (CASY) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • CASEYS GENERAL STORES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CASEYS GENERAL STORES INC increased its bottom line by earning $3.27 versus $2.86 in the prior year. This year, the market expects an improvement in earnings ($4.31 versus $3.27).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food & Staples Retailing industry. The net income increased by 210.7% when compared to the same quarter one year prior, rising from $12.65 million to $39.32 million.
  • Net operating cash flow has significantly increased by 122.51% to $56.47 million when compared to the same quarter last year. In addition, CASEYS GENERAL STORES INC has also vastly surpassed the industry average cash flow growth rate of 20.45%.

 

 

KR Chart KR data by YCharts

5. The Kroger Co. (KR)
Market Cap: $36.4 billion
Year-to-date return: 15.3%
Rating: Buy, A+

The Kroger Co., together with its subsidiaries, operates as a retailer in the United States and internationally. It also manufactures and processes food for sale in its supermarkets.

TheStreet said: "We rate KROGER CO (KR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, solid stock price performance and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • KR's revenue growth has slightly outpaced the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 8.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 28.39% and other important driving factors, this stock has surged by 55.21% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, KR should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • KROGER CO has improved earnings per share by 28.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, KROGER CO increased its bottom line by earning $3.45 versus $2.90 in the prior year. This year, the market expects an improvement in earnings ($3.86 versus $3.45).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Food & Staples Retailing industry average. The net income increased by 22.7% when compared to the same quarter one year prior, going from $422.00 million to $518.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Food & Staples Retailing industry and the overall market, KROGER CO's return on equity significantly exceeds that of both the industry average and the S&P 500.

 

 

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