Readers who regularly make a trip to the grocery store should be well acquainted with Maple Leaf Foods (TSX:MFI) products. This Mississauga-based company produces food products in Canada, the United States, and around the world. The domestic and global food market has undergone significant disruptions so far this decade. Today, I want to discuss how Maple Leaf stock has fared in 2022 and whether it can take advantage of these changes. Let’s jump in.
Maple Leaf stock has struggled mightily in 2022
Maple Leaf stock has dropped 16% week over week as of close on August 5. Its shares have declined 25% in the year-to-date period. That has pushed the stock into negative territory in the year-over-year period.
The top Canadian food producer made a splash in February 2017 with its acquisition of Lightlife, a manufacturer and brand of refrigerated plant-based protein foods in the United States. Vegetarianism and veganism rates have increased over the past two decades. Meanwhile, meat prices have also been on a steep rise, especially in recent years. The hype for plant-based alternatives seemed to reach a crescendo when Beyond Meat made its debut on the U.S. market.
Beyond Meat has fallen steeply from its post-listing spike. Still, investors should not dismiss the potential for this market. Vantage Market Research recently projected that the global plant-based food market would reach US$78.9 billion by 2028. That would represent a compound annual growth rate (CAGR) of 11% over the forecast period.
How does this company look after its Q2 earnings report?
This company unveiled its second-quarter fiscal 2022 earnings on August 4. President and Chief Executive Officer Michael H. McCain pointed out that Maple Leaf was faced with a “chaotic” and “unpredictable” situation that was “unprecedented” in the 40 years McCain had spent in the food industry. Despite its recent struggles, McCain remains confident that the company can deliver on its projected adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin expansion of 14-16%, as market conditions normalize.
Total company sales increased 3.1% year over year to $1.19 billion with an adjusted EBITDA of 6.2%. Its Meat Protein Group posted sales growth of 3.8% to $1.16 billion while its Plant Protein Group was hit by an $18.6 million restructuring charge. Management expects that the Plant Protein Group will achieve neutral or better adjusted EBITDA by the second half of 2023.
Maple Leaf delivered total sales growth of 5% in the first six months of fiscal 2022 to $2.32 billion. Sales growth in the Meat Protein Group has been driven by pricing action in response to inflationary pressures as well as a favourable mix-shift in product sales. The Plant Protein Group, however, posted a sales decline of 15% from the prior year. This sub sector has a hill to climb, but the company is committed to its growth over the long term.
Is Maple Leaf Stock worth buying today?
The company provided an outlook for the rest of 2022. Maple Leaf expects solid sales growth and adjusted EBITDA margin expansion between 14% and 16%. The Relative Strength Index (RSI) is a technical indicator intended to chart the historical strength or weakness of a given security. This stock last had an RSI of 26, which puts it in technically oversold territory at the time of this writing. Moreover, it offers a quarterly dividend of $0.20 per share. That represents a 3.6% yield.
