Hormel Foods Retained at Neutral - Analyst Blog
06 Settembre 2013 - 8:00PM
Zacks
On Sep 3, 2013, we reiterated our
Neutral recommendation on Hormel Foods Corporation
(HRL), based on the company’s future growth potential.
Why the
Retention?
Hormel reported mixed results for
the third quarter of fiscal 2013. While earnings per share of 42
cents missed the Zacks Consensus Estimate of 44 cents by 4.5%,
revenues of $2,159.5 million beat the Zacks Consensus Estimate of
$2,127.0 million. The year-over-year increase in revenues was
mainly led by increase in contribution from all segments,
accompanied by the recently acquired Skippy peanut butter line.
Higher expenditures impacted margins as well as earnings in the
quarter.
Hormel’s diversified portfolio
helps it to balance the profits and losses of its segments. The
company’s Refrigerated Foods segment’s operating profit declined
26.3% year over year, due to higher raw materials costs. However,
the same could not pull down the total margins significantly due to
hikes in other segment’s operating margins.
The company has also been attaining
success with respect to acquisitions. Hormel’s Skippy peanut butter
line’s sales increased in the reported quarter due to improved
distribution. Moreover, the company has plans to acquire the China
operations of Skippy in the current fiscal year.
Hormel has spent over $20 million a
year on advertisements in the past two fiscal years. The expenses
were utilized for the advertisement of burgers and turkey bacon,
which resulted in a double-digit sales hike for these products.
However, the increasing costs as
well as reducing supply of the raw materials like pork, poultry and
feed grains along with other products have been impacting the
company’s margins for quite some time. Moreover, due to low entry
barriers in the meat and food products market, Hormel faces stiff
competition from national and regional producers of other meat and
protein sources as well as from the manufacturers of pork and
turkey products.
Other Stocks to
Consider
Hormel currently carries a Zacks
Rank #3 (Hold). Other stocks worth a look in the industry include
Pilgrim's Pride Corporation (PPC),
Smithfield Foods, Inc. (SFD) and Tyson
Foods, Inc. (TSN). While Pilgrim's Pride carries a Zacks
Rank #1 (Strong Buy), Smithfield Foods and Tyson Foods carry a
Zacks Rank #2 (Buy).
HORMEL FOODS CP (HRL): Free Stock Analysis Report
PILGRIMS PRIDE (PPC): Free Stock Analysis Report
SMITHFIELD FOOD (SFD): Free Stock Analysis Report
TYSON FOODS A (TSN): Free Stock Analysis Report
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