Maple Leaf Foods (TSX:MFI): Should You Buy After its Earnings Release?

Maple Leaf Foods Inc. (TSX:MFI) stock has struggled so far in 2022. The company released its first-quarter earnings yesterday.

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Back in March, I’d suggested that investors should snatch up stocks that offered exposure to the food retail space like Maple Leaf Foods (TSX:MFI). Today, I want to discuss how this stock looks in early May. Moreover, we’ll look at its recent earnings release. Let’s jump in.

Why I’d sought to target Maple Leaf Foods earlier this year

The Canada Food Price Report for 2022 projected that food costs would increase between 5% and 7% for the full year. Canadians are seeing the most significant price increases in categories like vegetables, bakery items, dairy, and restaurants. This means that meat categories have remained somewhat static in comparison. That could provide a boost to a packaged meat company like Maple Leaf going forward.

Shares of Maple Leaf have dropped 4.6% in 2022 as of close on May 4. The stock is still up 1.9% from the previous year. This stock has provided some solid defence for investors in a choppy market climate. Beyond that, there are good reasons to be excited about the company’s future. Its foray into plant protein has yet to pay off in a meaningful way, but it shows that the company is moving in the right direction.

How does the company look after its first-quarter earnings report?

Maple Leaf Foods unveiled its first-quarter 2022 earnings after markets closed yesterday. It delivered total sales growth of 7% to $1.12 billion. In Q1 2022, free cash flow increased 4.3% to a loss of $186 million.

The Meat Protein Group posted year-over-year sales growth of 7.5% to $1.08 billion. Meanwhile, the Plant Protein Group saw its sales rise 5.2% to $44.9 million. This is a solid outing for this segment as interest in plant-based alternatives has continued to grow steadily among consumers. The Meat Protein Group did encounter some headwinds in the form of lower hog volumes processed as well as the impact of foreign exchange.

Looking ahead, Maple Leaf projects that its Meat Protein segment will deliver “mid- to high” single-digit sales growth. Meanwhile, it expects that its Plant Protein segment will report neutral or better adjusted EBITDA by the latter half of 2023. Last year, Bloomberg Intelligence projected that the plant-based foods market could value over $162 billion by 2030. That would represent a CAGR of 7.7% over the course of the decade.

Should you buy Maple Leaf Foods on the dip?

Shares of Maple Leaf Foods are trading in favourable value territory compared to its industry peers. It neared technically oversold territory for most of the month of April. Meanwhile, Maple Leaf Foods’s board of directors announced a quarterly dividend of $0.20 per share in its first-quarter earnings report. That represents a 2.8% yield. Maple Leaf is still a solid target for investors on the hunt for a defensive option in their portfolio in what has been a volatile spring.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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