The Zacks Food – Miscellaneous industry is an integral part of the Consumer Staples sector that is a go-to place for investors even when economic conditions are not very congenial. However, the food space has been grappling with several cost-related headwinds for a while, which has kept margins of many players under pressure. Most significant among these is elevated freight costs stemming from driver availability challenges in the industry and commodity cost inflation.

Further, firms are incurring high costs related to investments to keep pace with consumers’ evolving taste and preferences. These factors along with supply-chain bottlenecks and intense industry competition have been a drag on profits for many companies. This has positioned the food industry among the bottom 11% out of all Zacks industries. Moreover, the food space has witnessed a drop of 1.1% in the past six months, against the S&P 500 market’s rise of 4.1%.

Nonetheless, every cloud has a silver lining. Likewise, there are few hidden gems in the food arena, which have defied the industry trends with their solid strategic endeavors.

Hang in There, There’s Still Hope

As input costs and freight expenses shoot up, few food companies have been hiking prices of their products. Without much retaliation, consumers are seen to absorb such price hikes for certain food products, considering their importance as a staple item. Apparently, food companies enjoy certain privileges.

Certainly, the focus on innovation, product launches, and diversification has helped many food players strengthen their portfolio, draw traffic and boost the top line. Benefits from acquisitions and alliances have been acting as major drivers as well. In fact, some players are also undertaking prudent divestitures to shift focus from underperforming areas to the ones with higher growth potential.

Additionally, many food companies are gaining from their efforts to augment organic and natural offerings in response to rising health consciousness. Encouragingly, new food products are being accepted in the market, courtesy of impactful promotional skills. To top these, stringent cost-containment efforts and efficient productivity programs are aiding a host of food players to counter the aforementioned hurdles and stand out in the industry.

3 Stocks That Bucked the Industry Trend

That said, we have brought focus on three robust picks from the food space, which have put up a spectacular show even in the face of a challenging landscape. These stocks, which have depicted an impressive bull run in the past six months, boast a favorable Zacks Rank and possess long-term earnings per share (EPS) growth rate of more than 7%.

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Medifast, Inc. (MED - Free Report) is undoubtedly a solid bet. This Zacks Rank #1 (Strong Buy) stock has more than doubled in the past six months, backed by its superb earnings surprise history. Notably, the Baltimore-based company has outperformed the Zacks Consensus Estimate in all of the trailing four quarters, the average being 16.6%. Also, the company’s robust potential is reflected from its strong estimate revisions in the past 60 days as well as long-term growth rate of 20%.

Investors can also count on The Chefs' Warehouse, Inc. (CHEF - Free Report). The Connecticut-based company’s earnings estimates for the current year have risen by 4 cents to 77 cents in the past 60 days. Also, this Zacks Rank #2 (Buy) company has seen its shares rally close to 38% in the past six months. Notably, Chefs' Warehouse carries a long-term growth rate of 22% and its earnings beat the Zacks Consensus Estimate by an average of 57.2% in the trailing four quarters.

Finally, Pinnacle Foods Inc. (PF - Free Report) can also satiate investors’ appetite. Carrying a Zacks Rank #2, the New Jersey-based company’s shares have gained 16.1% in the past six months. Pinnacle Foods, which has delivered a positive earnings surprise of 0.6% in the past four quarters, has been gaining from sturdy in-market performance. The company has been benefitting from robust brand portfolio and focus on strategic acquisitions. It carries long-term growth rate of 8%.

The Bottom Line

Like a book should not be judged by its cover, investors should not be misguided by the food industry’s overall performance. Though companies in the space are facing cost barriers and threats from the tariff war, the ones we highlighted appear well placed, given the solid strategic arrows in their quiver.