More than other companies that produce packaged meat,Hormel Foods ( HRL ) has tried to come out with innovative products for consumers on the go.
It's produced pepperoni snack packages, premium hams, deli meats, party trays and refrigerated offerings. A couple of recent additions to its portfolio include Skippy peanut butter, which it purchased, and Rev Wraps, a line of snacks made up of ham and cheese.
The company has said it expects headwinds in Q2 and Q3 because of the cold eastern winter and rising commodity prices, especially pork and beef. But it's managed three quarters of accelerating earnings with quarterly EPS changing from -4% to growth of 2%, 18% and 19%. Analysts in the most recent quarter are expecting a 22% increase when it reports May 21 before the market opens.
Sales growth has been running in the mid single digits the past several quarters.
Hormel is the No. 3 ranked company by Composite Rating out of seven companies in the Food-Meat Products industry group, which is No. 10 out of 197 industry groups, as of Wednesday's IBD. The group has risen from No. 53 just seven weeks ago.
It's had only two years of earnings decline in the past 12 years. They were 2002 and 2008, which were tough years in every industry.
The company has produced a return on equity of 17% with just a small amount of debt. Pretax margins are running around 9%.
The five-year annualized EPS growth rate is 13%, and the Earnings Stability Factor is 8 on a 0 to 99 scale, where low numbers translate to steady earnings growth.
Analysts are forecasting 16% growth this year and 13% next year, impressive for a mature company in the food business.
Hormel pays a dividend of 20 cents per share. That's up from 8.75 cents in 2000. That translates to a 1.6% annual yield at current stock prices.