Wingstop And Hershey Are Two Food Stocks Overcoming Inflation


Hershey and Wingstop beat inflation with market-beating results

Food stocks have come into the spotlight as a defensive play for recessionary times. The recession was confirmed with the first estimate of Q2 GDP of -0.9% and this figure is likely to be revised downwards. The idea is that consumers focus their money on food in favor of discretionary items and, in the case of Wingstop (NYSE: AL) i Hershey (NYSE: HSY), some brands are in a better position than others. These two iconic names offer comfort food appreciated by a wide range of consumers and have the brand recognition to carry them through the toughest of times. As consumers downsize on clothes, cars and homes, they’re turning to entertainment spots like Wingstop with its line of Buffalo wings and movie theaters with their wide assortment of candy, and it’s paying off.



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Wingstop flies higher with a surprise bonus

Wingstop’s success is due to more than just America’s love of chicken wings. The company is expanding its footprint and working to capitalize on scale efficiencies to drive shareholder value. Among the company’s many pillars of growth is the digital avenue, which accounted for 60.5% of sales. However, the key point of the report is the company’s margin, which was well above expectations. The company reported revenue of $83.8 million that missed analysts’ consensus by nearly 300 basis points, but earnings that were well above expectations. The adjusted $0.45 beat the consensus by $0.09 due to efforts to mitigate inflation and an even better outlook for the back half of the year.

“Our second quarter results demonstrate the resilience and underlying strength of the Wingstop brand as the unit economics continued to strengthen throughout 2022, fueling another record number of net new openings this quarter.” he said. “We are in a unique position for the latter half of 2022 where we benefit from significant deflation in bone wings, we have a proven playbook, along with levers to drive sales that give us confidence in our ability to meet our 2022 outlook.”

Wingstop shares are up more than 20% following the earnings report and could rise further. The stock suffered a deep correction earlier this year which opens the door for another 50% increase during the pullback. The stock is trading at a very high valuation for the times, but is still delivering resilient results, so a return to the $180 all-time high is not unrealistic if not without obstacles.
Wingstop and Hershey are two food stocks that beat inflation

Sweet results from Hershey and a dividend increase too

Hershy is among the most highly valued consumer discretionary stocks on the market, and for good reason. The company’s iconic brands give it a deep moat and strong cash flow to fuel the dividend. The dividend isn’t the highest in the consumer staples sector either, but it’s growing as fast as any. The stock pays 1.9% after the 15% distribution increase and is a safe payout for income investors. The company has been raising payouts for 14 years and still has plenty of ammunition to fire some more.

This stock didn’t make the move seen in Wingstop shares, but they are rising. Hershey shares gained more than 2.0% in a trend-following move that should take it to a recent all-time high. A move to a new all-time high would be bullish and could send the stock up another 10% to 15%, but there is a risk. There may be resistance at the all-time high that keeps the value range bounded and moving sideways for the next few months.
Wingstop and Hershey are two food stocks that beat inflation



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