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Maple Leaf Foods: Cooking Up Growth in Plant-Based Protein

Technology
Image source: Getty Images

Written by Ambrose O'Callaghan at The Motley Fool Canada

Maple Leaf Foods (TSX:MFI) is a Mississauga-based company that produces food products in the United States, Canada, Japan, China, and around the world. Today, I want to discuss how this Canadian staple looks after its earnings reveal. Moreover, I want to explore the potential of its determined foray into the plant-based food alternatives market. Let’s dive in.

How has this stock performed over the past year?

Shares of Maple Leaf Foods were up 11% in early afternoon trading on Thursday, May 11. That pushed the stock back into the black in the year-to-date period in 2023. Its shares are up 5.4% year over year. Investors who want to see more of its recent performance can toggle the interactive price chart below.

Should investors be happy with the company’s recent earnings?

This company unveiled its first-quarter (Q1) fiscal 2023 earnings before markets opened on May 11. Maple Leaf reported total sales growth of 4.3% to $1.17 billion in Q1. Its Meat Protein Group achieved sales growth of 5% to $1.14 billion, making up the bulk of revenues. Meanwhile, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $87.3 million, as it also posted an adjusted EBITDA margin of 7.6%. That was 100 basis points (bps) better than the previous year.

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Maple Leaf’s Plant Protein Group is still in its early stages of establishment. This segment reported total sales of $37.4 million. Moreover, its adjusted EBITDA climbed 60% year over year to a loss of $12.0 million. The company is targeting a neutral or positive adjusted EBITDA for this segment in the second half of 2023.

Overall, the company reported a net loss of $57.7 million, or $0.48 per share, in Q1 of fiscal 2023. Maple Leaf’s earnings were hit by its Meat Protein Group performance, as pork market headwinds, cost inflation, and increased start-up expenses presented challenges. Despite its size relative to the Meat Protein segment, the Plant Protein Group was the bright spot for Maple Leaf in the opening quarter of the year.

Here’s why investors should be excited about Maple Leaf Foods’s future

Maple Leaf expects its Meat Protein Group to deliver mid- to high-digit sales growth in 2023. Meanwhile, it is also forecasting an adjusted EBITDA margin expansion in the range of 14-16%.

As stated, the company expects it Plant Protein Group to deliver neutral or positive adjusted EBITDA in the second half of fiscal 2023. Investors should be eager to get in on the plant-based food industry. The Good Food Institute (GFI) recently valued the plant-based food market in the United States at $8 billion in 2022. According to the report, six in 10 households bought a plant-based food last year.

Future Market Insights recently estimated that the global plant-based food market was valued at US$11.3 billion in 2023. The report projected that this market would grow to US$35.9 billion by 2033. That would represent a compound annual growth rate of 12% over the forecast period.

Maple Leaf Foods: Why I’m buying this stock today

Shares of Maple Leaf are trading in favourable value territory compared to its industry peers at the time of this writing. Moreover, it is geared up for very strong earnings growth in the quarters ahead. The stock currently offers a quarterly dividend of $0.21 per share. That represents a 3% yield.

The post Maple Leaf Foods: Cooking Up Growth in Plant-Based Protein appeared first on The Motley Fool Canada.

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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. The Motley Fool has a disclosure policy.

2023