8 Food, Drink and Dining Stocks Advisors Like Right Now

Whether catering to dining in or dining out, the food, beverage and restaurant space offers attractive opportunities for a long-term portfolio. Several MoneyShow.com contributors highlight eight favorite investment ideas including those in snack and pantry products, soda and beer, and some popular fast food and casual dining establishments. Mark Skousen and Jim Woods, Fast Money Alert We are going to put a little spice in our fast-money holdings by adding a great company that literally makes the spices in your life -- that company is McCormick & Co., Inc. . If you go check your pantry right now, you are almost certain to have a few products made by McCormick. Salt, pepper, cinnamon, oregano, parsley and spices of nearly every variety are the lifeblood of this company, and their products are ubiquitous around the globe. Last year, during the midst of the pandemic, MKC shares surged as the company benefited from the cook-at-home trade. But McCormick is much more than a pandemic play. It is a stalwart in the food industry, and it's expected to have a strong earnings showing when it reports results again on Jan. 28. We suspect that, given the changing character of this market due to both Omicron and the Fed, the fast money will continue to rotate into more cyclical plays, such as consumer staples. MKC just happens to be a very fast-moving staple that is well-positioned to break out here. So let's buy McCormick & Co. at market, with a protective stop at $71.90. John Buckingham, The Prudent Speculator J.M. Smucker -- known for its jam, jelly and peanut butter -- posted fiscal Q2 EPS of $2.43 on just over $2 billion of sales. The bottom-line print was 18% better than the consensus analyst estimate of $2.05, and slightly higher than the same quarter a year ago. Strong performance for Uncrustables contributed to 6% comparable sales growth in the U.S. foods segment. To ensure against a lack of raw materials given supply constraints, management has invested in a carrying a bit more inventory than usual. These actions are expected to reduce operating cash flow by roughly $80 million, resulting in a $700 million free cash flow estimate. The action didn't stop management from raising its latest sales and EPS guidance for the full fiscal year by $160 million and $0.10 from each respective midpoint, given its view that a favorable sales mix combined with price increases and cost savings initiatives will benefit results in future quarters. Competition remains stiff for space in the inner grocery store aisles as well as relevance given consumer preference trends toward fresh and healthy foods, but Smucker still offers modest growth potential with EPS projected to rise from $8.59 in fiscal '22 to $9.01 in fiscal '23 and $9.48 on fiscal '24, to go along with a robust dividend yield of 3.0%. We like that the valuation is on the lower end relative to its peers and that our exposure to the name contributes stability to our portfolios. Our target price for SJM now stands at $152 a share. Gavin Graham, Internet Wealth Builder Unilever , an Anglo-Dutch food and consumer products company, derives more than 60% of its revenues from emerging and frontier markets, with brands that include Hellmann's mayonnaise, Ben and Jerry's ice cream, and Dove shampoo and deodorants. Unilever moved its corporate headquarters to the U.K. in 2020 and ended its dual listing structure, partially to avoid the 15% withholding tax levied on non-Dutch shareholders. In the nine months to Sept. 30, Unilever delivered a better-than-expected underlying sales growth (USG) of 2.5%, although this consisted of 4.1% price increases and a 1.5% drop in volumes, showing the difficulty Unilever has with growing its mature food businesses. With its ability to pass through rising raw material costs and the sale of low growth tea business, its revenues should continue to grow 3%-5% and earnings 5%-6%. It is consequently a Buy for its exposure to the emerging markets' middle classes and its faster growing personal care business. The quarterly dividend remained unchanged at €0.4268, giving a yield of 3.8%. A €3 billion share buyback program will complete by the end of the year. We continue to rate the stock a buy. Mike Cintolo, Cabot Growth Investor We love cookie-cutter stories -- retail firms with a proven product or service that can grow their business many-fold simply by opening up more locations. Such a business model remains powerful, producing rapid and reliable growth, which is the catnip that gets institutional investors piling in. Dutch Bros. has been around for 30 years and focuses on hand-crafted, high-quality cold and hot (82% of drinks served cold) beverages; espresso-based drinks are the core, but there's also milkshakes, coffees, teas, sodas and an energy drink (its most popular offering). There's more to it than that: Dutch Bros. puts a big emphasis on culture, with runners meeting drivers before they hit the drive-through window to personalize orders or explain the menu, then take orders via tablets. Growth has been massive -- total locations were 503 as of September (the new prototypes are around 900 square feet), up from 441 at year-end 2020 and 370 at year-end 2019. The firm is opening new locations like mad, with 33 new ones in Q3 and at least 30 more coming in Q4. Long term, Dutch thinks it can have 4,000 locations in all. Throw in solid same-store sales growth (7% in Q3) and the numbers are excellent -- Q3 saw revenues up 50% and earnings of seven cents per share, up 150%, with a lot more of that expected in the years ahead. The valuation is rich ($9 billion market cap) and the stock is new, but we're keeping an eye on BROS -- this is the type of new, easy-to-understand growth story that could have a good run as the stock becomes better known. Doug Gerlach, Investor Advisory Service Texas Roadhouse is a moderately priced, full-service, casual dining restaurant -- known for its free unlimited supply of in-shell peanuts and rolls along with friendly, attentive service. Though the large majority of the company's restaurants carry the Texas Roadhouse nameplate, it also includes Bubba's 33, a family-friendly sports restaurant featuring scratch-made food that was launched in 2013, and Jaggers, a fast-casual concept offering burgers, chicken, and salads launched in 2014. Typical Texas Roadhouse restaurants are freestanding with capacity of approximately 300 guests. The concept has resonated with customers as reflected by consistent comparable restaurant sales growth. The pandemic broke the positive comparable sales streak, but year-to-date comps have snapped back nicely. To-go sales provide another growth opportunity, as prior to the pandemic the company had limited takeout exposure. As of the most recent quarter, 15% of total sales were to-go, more than double pre-pandemic levels even as its restaurants have returned to full seating capacity. Unit growth remains a key component of the company's strategy. The current total domestic restaurant count is just over 600 with a long-term unit opportunity of at least 700-800 units, providing several years of runway even before considering the potential from further international growth. The company also has a history of modest share repurchases, supporting projected earnings growth of 12% over the next five years. This implies EPS of $5.32 at the end of this period. Applying a high P/E of 30.8, we get a potential high price of $164. Using a low P/E of 21.5 combined with trailing twelve-month EPS of $3.02 results in a potential low price of $65. Therefore, we model an upside/downside ratio of 3.1 to 1 and a projected high return of nearly 15% annually. Chuck Carlson, DRIP Investor I look at a lot of company earnings reports during a typical earnings season, so it takes more than just a decent report to really stand out in my mind. McDonald's recently delivered a true attention-getter. Indeed, the restaurant giant posted global comparable store sales of nearly 13% in the third quarter and a 10.2% increase on a two-year basis. That kind of same-store growth is impressive for such a big company and points to the competitive advantages McDonald's has versus its competitors. McDonald's was able to show nice growth across all segments. U.S. comparable sales increased 9.6% in the quarter (14.6% on a 2-year basis) and international operated markets segment had comparable sales increase of 13.9% (8.9% on a two-year basis). Another growth data point is the company's increase in digital sales. Systemwide digital sales were about $13 billion, or over 20% of total systemwide sales in the firm's top six markets. The sales gains drove a nice boost to the bottom line. Per-share profits of $2.76 were up 24% year over year and handily beat the analysts' consensus estimate of $2.46. Reflecting the strong operating results and the firm's confidence in the future, McDonald's recently boosted its dividend 7% to a quarterly rate of $1.38. The dividend increase marks the 45th consecutive year that McDonald's has boosted the dividend. The stock currently yields 2.2%. The recent stock action of McDonald's is bullish, and I expect the latest price breakout to have some legs. The shares have underperformed the S&P 500 over the last 12 months. Thus, I think the stock has room for more catch-up, and I look for the stock to put up nice results in 2022. McDonald's offers a solid growth-and-income investment for any portfolio. Bruce Kaser, Cabot Undervalued Stocks Advisor Coca-Cola reported an encouraging quarter; revenues rose 16% from a year ago (better than the consensus estimate) as more economies around the world are recovering from the pandemic. Earnings rose by 18% from a year ago. Free cash flow was strong, as well. Management raised their full-year revenue, earnings and free cash flow guidance, and expressed confidence in continued momentum through 2022. The Coca-Cola story remains on track. While the valuation is not statistically cheap, the shares remain undervalued given the company's future earning power and valuable franchise. Also, the value of Coke's partial ownership of a number of publicly traded companies (including its 19% stake in Monster Beverage) is somewhat hidden on the balance sheet, yet is worth about $23 billion, or 9% of Coke's market value. This $5 per share value provides additional cushion supporting our $64 price target. KO shares offer an attractive 3.0% dividend yield. The stock is a buy. Molson Coors Beverage Company is one of the world's largest beverage companies, producing the highly recognized Coors, Molson, Miller and Blue Moon brands as well as numerous local, craft and specialty beers. Our thesis for this company is straight-forward -- a reasonably stable company whose shares sell at an overly-discounted price. Its revenues are resilient, it produces generous cash flow and is reducing its debt. A new CEO is helping improve its operating efficiency and expand carefully into more growthier products. The company recently re-instated its dividend. The stock remains cheap, particularly on an EV/EBITDA basis, or enterprise value/cash operating profits, where it trades at 8.1x estimated 2022 results, still among the lowest valuations in the consumer staples group and below other brewing companies. We continue to rate the stock a buy.

8 Food, Drink and Dining Stocks Advisors Like Right Now

Among these favorite investment ideas is the rapidly growing Dutch Bros. chain.

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