CAG ConAgra Brands Inc

Hormel Foods Corp. (HRL) will be reporting its fourth quarter and fiscal 2011 earnings on Tuesday, November 22, 2011.

The current Zacks Consensus Estimate for earnings per share (EPS) is 42 cents, representing an annualized loss of 5.86%.  

With respect to earnings surprises over the trailing four quarters, HRL outperformedthe Zacks Consensus Estimate in three quarters and was in line in one.  Average earnings surprise was 14.42%, implying that the company outperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Third Quarter 2011 Highlights

On August 25, Hormel Foods Corporation posted strong results for the third quarter of fiscal 2011 with an EPS of $0.36 compared with $0.32 in the corresponding period of fiscal 2010. The recorded EPS surpassed the Zacks Consensus Estimate by a penny.

Net earnings attributable to the company reached $98.5 million, up from $85.4 million in the third quarter of 2010. The increase was driven by the year-over-year earnings growth in Grocery Products and Jennie-O Turkey Store segments coupled with strong international business across all segments.

Net sales were $1,910.6 million, up 10.4% from $1,730.5 million in the corresponding period of the previous year, outpacing the Zacks Consensus Estimate of $1,881 million. This improvement can be ascribed to increased revenues, primarily in the grocery product segment and Jennie-O Turkey Store.

Agreement of Estimate Revisions   

In the last 30 days, none of the analysts increased or decreased the company’s earnings per share (EPS) estimates for the fourth quarter, as there was no catalyst for such change. For fiscal 2011, none of the analysts increased or decreased their estimate, and followed a similar trend for fiscal 2012.

Magnitude of Estimate Revisions   

Estimates over the last 30 days remained static at 42 cents per share for the fourth quarter of 2011, representing a year-over-year loss of 5.86%.

Estimate for fiscal 2011 remained static at $1.73 over the last 30 days while that for fiscal 2012 showed a similar trend at $1.78. These estimates represented a year-over-year growth of 14.77% and 2.44% for 2011 and 2012, respectively.

Our Take   

Hormel is likely to post encouraging results in the fourth quarter and fiscal 2011 based on the company’s portfolio of product mix and rise in prices of its value added products. Moreover, continued acquisitions/ integration, retail penetration, brand building and promotional activities are expected to ensure future expansion for the company

Based in Austin, Minnesota, Hormel Foods Corporation (HRL) is a leading manufacturer and marketer of various meat and food products in the United States and internationally.

The company faces stiff competition from ConAgra Foods Inc. (CAG), Kraft Foods Inc. (KFT), and Tyson Foods Inc. (TSN).

We currently maintain a long-term Neutral recommendation on the stock. Hormel has a Zacks #3 Rank, which translates into a short-term Hold rating (1-3 months).

 
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