Which Is The Better Buy

With inflation soaring and consumers spending less, the pandemic-inspired preference for cooking at domicile has persisted. That's expert for packaged food companies. The $1.03 trillion U.S. packaged nutrient market is projected to grow at an annual rate of nearly 5% through 2030.

But it's not all smooth sailing. To cushion margins from increased labor and transportation costs, packaged nutrient suppliers have been steadily raising prices. The risk is that consumers can rapidly change behavior based on price hikes. Let's take a look at two packaged nutrient titans and where each is headed.

Kraft Heinz

The Kraft Heinz Company (KHC 2.42%) operates the third-largest nutrient and drink visitor in North America and the fifth-largest in the globe. With 2021 net sales of approximately $26 billion, Kraft comprises more than 200 brands loved by grocery shoppers around the world, including Oscar Mayer, Ore-Ida, Kool-Aid, Velveeta, and Philadelphia Cream Cheese.

Oscar Mayer Wienermobile with foggy vista as a backdrop.

Prototype Source: The Kraft Heinz Company.

Co-headquartered in Chicago and Pittsburgh, Kraft Heinz sells its products in nearly 200 countries across the globe and retains employees in over 40 countries. The pandemic has challenged Kraft Heinz considerably, primarily with persistent supply chain disruptions and price increases. As a upshot, the mac & cheese magnate's Q2 margins dropped to xxx.3%, down over 4 percentage points from the same period last year.

To offset narrowed margins, Kraft implemented several rounds of toll hikes, raising prices an average of 12.iv% overall. Simply the results have been less than desirable. The Lunchables maker noted a slight slowdown in demand due to the higher prices, and a fundamental indicator for sales volumes dropped 2.3% in the second quarter.

The burning question on investors' minds remains this: With Kraft Heinz stock trading roughly 63% down from its highs of 2017, is all of this bad news already priced in? CEO Miguel Patricio claims that 99% of the visitor'due south cost hikes accept already been implemented or announced, and that whatever additional increases will be "surgical."

Combined with the fact that Kraft but raised its 2022 revenue growth forecast from a depression- to a high single-digit per centum, this stock is likely to meet some upside recovery.

Full general Mills

General Mills (GIS 2.thirteen%) non only makes many of the world'southward favorite cereals like Lucky Charms and Cheerios, but also operates other food brands including Betty Crocker, Yoplait, Annie'due south, and Blue Buffalo pet foods. The company's more-than-100 nutrient brands stack up to a major presence in the grocery store.

Afterward a potent fiscal showtime quarter, the Cinnamon Toast Crisis maker recently raised its full-year outlook for organic net sales, earnings-per-share growth, and operating turn a profit. Outlook for organic sales growth and diluted EPS growth were both raised two%, a sign of confidence for the three remaining fiscal quarters. And General Mills anticipates total-year operating profit to grow equally much every bit 3%.

But as it has at other nutrient purveyors, the loftier-inflation environment has also impacted General Mills. While the company has enjoyed a lasting consumer trend of cooking and snacking at domicile, implementing toll increases in accord with higher operating costs has been tricky. On i hand, the company needs to make up for shrinking margins, merely on the other, there is the risk of customers trading down to non-branded alternatives.

Despite challenges, investors seem to like what Full general Mills is doing. The stock recently printed new all-time highs for six months in a row, from April through September. This presents a much unlike investment scenario than Kraft stock, which is trading far below its all-fourth dimension high.

So should investors purchase the dip on Kraft or purchase the highs on General Mills?

To gauge which stock is the ameliorate buy, let's compare market capitalizations, price-to-earnings ratios, and dividend yields.

Metric	The Kraft Heinz Company	General Mills
Market cap	$44.2 billion	$46.5 billion
Cost-to-earnings ratio	34.87	16.46
Dividend yield	iv.44%	2.76%

Data source: E-Trade

A much lower price-to-earnings ratio makes General Mills a more than enticing buy, merely Kraft Heinz's superior dividend yield is besides attractive to investors. While General Mills might exist the improve near-term buy, both of these consumer staples stocks present long-term potential for investors, and both await to be solid investments in the years to come.

Micah Affections has no position in any of the stocks mentioned. The Motley Fool recommends The Kraft Heinz Company. The Motley Fool has a disclosure policy.