On Mar 1, we reiterated our Neutral recommendation on the
branded foods and meat manufacturer,
Hormel Foods Corporation
), due to its decent fiscal first quarter 2013 results.
Hormel posted earnings per share of 48 cents, flat year over
year, while falling a penny short of the Zacks Consensus
Estimate. Although revenue escalated 3.8% to $2,116.2
billion, it lagged marginally behind the Zacks Consensus Estimate
Following the release of the fiscal first quarter 2013
results, the Zacks Consensus Estimate for fiscal 2013 remained
unchanged at $1.98 per share. However, the Zacks Consensus
Estimate for fiscal 2014 went up 1.4% to $2.23 per share.
Hormel benefited from the high sales in four out of five of
its segments. The company witnessed higher sales from its
value-added products as well as international regions, mainly
China. However, the increase was offset by a rise in the feed
costs as well as lower margins from the pork processing business.
SG&A also increased 2.2% against the year-ago quarter.
It is expected that the pork processing margins will continue
to face a downward trend in the near future, coupled with an
increase in the feed costs. However, the sales of value-added
products of Hormel are expected to increase.
Also, Hormel acquired the Skippy peanut butter business in
Jan, apart from its operations in China. The acquisition is
expected to be accretive to Hormel's earnings. The purchase will
help Hormel expand its product portfolio and also diversify its
offerings beyond the core meat business which is sluggish of
late. Moreover, the diversification will also help control
Hormel's increasing raw material costs.
Other Stocks to Look For
Other stocks that are performing well in the food industry are
Hillshire Brands Company
Tyson Foods Inc.
); each carrying a Zacks Rank #1 (strong Buy). Another stock,
Pilgrim's Pride Corporation
) carries a Zacks Rank #2 (Buy).
HORMEL FOODS CP (HRL): Free Stock Analysis
HILLSHIRE BRAND (HSH): Free Stock Analysis
PILGRIMS PRIDE (PPC): Free Stock Analysis
TYSON FOODS A (TSN): Free Stock Analysis
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