Healthy Alternatives in the Food-Production Sector

Consumers are becoming increasingly aware of choosing food products that are healthy, more organic, and free of potentially harmful residuals from pesticides. There are also growing consumer concerns about food that is produced with genetically modified organisms (GMOs). And for investors looking to buy into the healthy food trend, there are alternatives in the food-production sector.

General Mills responding to consumer concerns over GMOs
General Mills (NYSE: GIS  ) announced earlier this year that it would eliminate the use of GMOs in the company's original Cheerios. The decision was designed to respond to consumers who had pressured the cereal maker to label products made with GMOs or, in the alternative, to eliminate genetically modified ingredients.

GMOs are widely used in the food-production sector, especially for foods made with corn starch, corn syrup, beets, and soybeans. For General Mills, this is a good idea and fits in well with the company's history of being ecologically friendly. But it's only a first step.

In the meantime, there are other food-production companies for consumers and investors alike who have a taste for wholesome organic foodstuffs.

United Natural Foods a leader in the natural-food industry
United Natural Foods (NASDAQ: UNFI  ) offers an array of natural and organic food and beverages ranging from sports drinks to nuts.

The company presently boasts a market cap of $3.7 billion in a sector that will continue to grow as more consumers buy into the natural food concept. Moreover, the company's recent earnings report along with its forward-looking guidance anticipate increased sales, revenue, and earnings growth.

In fact, United Natural Foods has had top and bottom line growth over the past two years. In the 2013 fiscal year, revenue growth was higher than the industry average of 7.2%. In the fourth quarter, revenue was up by 13.6% compared to the year-ago period.

The stock price has risen by more than 50% over the past year and is currently hovering at $72.50 per share. This might seem pricey, but it is still off the 52-week high by about $7. And earnings continue to grow. In 2013 earnings per share were $2.18 compared to $1.86 in 2012, with more anticipated.

For the remainder of fiscal 2014, which ends Aug. 2, United expects net sales in the range of approximately $6.7 billion to $6.8 billion -- an increase of about 10.5% to 11.8% compared to the previous fiscal year. And earnings per diluted share are expected to come in at $2.45 to $2.51, which is 12.4% to 15.1% higher than fiscal 2013.

This guidance should support gains in the company's share price as the year progresses, making United Natural Foods a healthy choice for investors.

Can White Wave keep surfing?
WhiteWave Foods (NYSE: WWAV  ) is known for innovative products like its popular Pure Almond Almondmilk and International Delight CoffeeHouse Inspirations. Almond-based milk was initially an option for consumers with lactose intolerance. Now, almond milk, soy milk, and other plant-derived milk products are growing in popularity as consumers seek what they perceive to be healthier milk products.

Back in February, the company reported solid fourth-quarter and fiscal 2013 results. Highlights included quarterly diluted earnings-per-share growth of 22% to $0.22. For the year, earnings rose by 23% to $0.74 per share. The robust earnings growth in the last quarter was the result of continued net sales growth -- 11.5% to $679 million.

Looking ahead, WhiteWave anticipates diluted earnings per share for the first quarter to come in at $0.18 to $0.20. For fiscal 2014, the company expects earnings in a range of $0.90 to $0.94. The company believes these earnings numbers will be driven by soy milk, almond milk, and coconut milk beverages, as net sales of these products grew by 13% in the first quarter. Moreover, for the full year, net sales were also up by 13% compared to 2012.

One caveat investors in WhiteWave should consider is the effect the ongoing drought in California might have on almond and soy production.

A supply shortage of these plants could manifest itself in food-cost inflation next year. This matters because price spikes will put pressure on the company's margins. And the costs will invariably be passed onto consumers. This could impact the company's sales in 2015. That being said, these issues are more of a concern for traders. Meanwhile, long-term investors will benefit from continued growth in the broader natural and organic food sector.

Final wholesome thought
Natural and organic foods are becoming increasingly popular with consumers. And this popularity will continue to benefit companies like United Natural Foods and WhiteWave. Moreover, as these companies continue to gain market share, a company like General Mills will need to adapt by introducing new natural and organic products. Ultimately, investors with a long-term view will benefit from continued growth in the organic food-production sector.

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