(FORTUNE Magazine) – With profit outlooks souring at most companies and share prices jiggling like Jello, it takes a strong stomach to buy stocks. Among the exceptions are those of food companies, traditionally safe havens in a weakening economy. Security analyst Nomi Ghez of Goldman Sachs expects the major food processors she follows to raise earnings per share an average 12% in each of the next two years, far above the 2.5% growth her firm expects for Standard & Poor's index of industrial stocks in 1990. Propelling growth are 5% yearly price increases and volume growth of 3% to 5%, compared with a mere 1% unit growth for the food industry overall. The big food companies are eating up market share as supermarket retailers, armed with sales data from computerized scanners, push weaker competitors' products off shelves. Operating efficiencies and low raw-material costs -- expected to fall 20% in 1990 -- should also help earnings growth. So will stock buybacks, which have the effect of boosting earnings on each share still outstanding. Says Ghez: ''Ninety percent of the companies I follow are buying in shares.'' Food stocks have only one problem. Investor enthusiasm has already made many of them as expensive as beluga malossol caviar. Between 1980 and last year, the group rose almost 24% annually, vs. 12% for the S&P industrials. This year it is up another 28% through October, vs. 20% for the index. Average share prices hover at 16 times earnings -- with multiples of 18 and higher for some food stocks -- compared with the market's average P/E of 14.2. Still, First Boston analyst Eric Larson insists the feast is far from over. If you look at estimated 1990 earnings, he says, food companies trade at P/Es only 7% higher than the market average. ''Their stability merits them at least a 20% premium,'' he figures. Adds Ghez: ''With little sweat, investors can get a 15% total annual return, even if the market doesn't go anywhere.'' John McMillin of Prudential-Bache, who considers the group generally overpriced, makes an exception for beef and pork processor IBP. U.S. per capita consumption of beef is declining, but IBP, 51% owned by Occidental Petroleum, has steadily taken business from smaller, less efficient operators. Highly profitable exports to Japan, where a price of $24 a pound for beef tenderloin doesn't seem to curb appetites, represent 8% of sales and are growing fast. McMillin expects IBP's 1989 net income to fall 36% to $40.1 million, or 85 cents per share, because last year's drought ravaged already depleted cattle herds. But both he and Timothy Ramey of County NatWest USA predict that the stock will stampede past $20 next year as the herds are rebuilt. Philip Morris, which now gets half its revenues and a third of its profits from food, has been one of the stock market's red-hot smokers this year. The price has jumped 65%, but Emanuel Goldman of Paine Webber says the stock remains a bargain at a price/earnings multiple of 16. Earnings should be up 20% this year, he says, followed by gains of 22% in 1990 and in 1991. ''In a mushy economy, this is the right stock to be in,'' argues Goldman. The key to growth is Philip Morris's enormous and highly predictable free cash flow. Europe's 1992 economic union could bring fat years for some food companies. By consolidating operations there, Ghez says, they will be able to boost operating profits twice as fast as in the U.S. She likes CPC International, the U.S.-based food processor with the largest percentage of sales in Europe, and Swiss-based Nestle, No. 1 in food on the Continent. CPC makes Skippy peanut butter and Hellmann's mayonnaise in the U.S., but its jewel is the Knorr line of high-priced soup and sauce mixes, which carry 50% gross margins and account for some $1 billion in worldwide sales. Takeover rumors lifted CPC stock to $69 in mid-November, and Ghez expects 1989 earnings growth of more than 15% to carry it to $82 in a year. Nestle, whose $8 billion in U.S. revenues comes from such products as Taster's Choice coffee and Stouffer's Lean Cuisine, has two types of shares, bearer and registered. U.S. investors can buy either kind, as well as American Depositary Receipts, through most brokers. Ghez prefers the slightly cheaper registered shares, selling for 7,845 Swiss francs or $4,852 at the recent exchange rate. She expects Nestle's earnings per share to increase 16.5% this year and 12% in 1990, and the stock price to rise 45% in the next 12 months. Anglo-Dutch Unilever is another appetizing food stock. Pru-Bache analyst John Campbell in London likes Unilever's aggressive and smooth acquisition strategy. The company scooped up 49 outfits this year without diluting its annual earnings growth of 11% to 12%. Unilever stock comes in two varieties. Campbell prefers the Dutch Unilever NV shares over those of English Unilever PLC, which trade as ADRs. First Boston's Larson is a bull on Borden, which took a $404 million after- tax charge in the third quarter to close 65 plants. ''This will give the company a mid-teens growth rate for the next five years,'' he says, ''compared with 12% before the restructuring.'' Archer-Daniels-Midland produces commodities that go into foods -- soft-drink sweetener and soybean meal, as well as ethanol used in motor fuel -- rather than items you will find at the supermarket. Earnings are recovering from the drought, and McMillin likes ADM as an offbeat food play.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: BULLISH ON BEEF IBP, which turns cattle into carcasses in Dakota City, Nebraska, is one of several food companies that look like buys to many Wall Streeters. It has been a bum steer since it went public at $19 a share just before the 1987 crash. But now analysts expect an earnings surge.