Neutral on Hormel - Analyst Blog
September 07 2012 - 1:57PM
Zacks
We are maintaining our Neutral
recommendation on Hormel Foods Corporation (HRL)
over the long term.
We are optimistic on the company’s
strong fiscal third quarter 2012, which saw positive sales
momentum. Hormel’s Grocery Products and Jennie-O Turkey Store
witnessed improvement. Moreover, the increasing share of
value-added branded products in Hormel’s product-mix strengthens
our view on the stock.
Hormel’s balance sheet historically
provides high returns, thus positioning it above other industry
players like ConAgra Foods Inc. (CAG),
Kraft Foods Inc. (KFT) and Tyson Foods
Inc. (TSN). The company is financially well positioned to
pursue more strategic acquisitions, which are anticipated to
strengthen its growth profile in the future. The company’s dividend
declarationupholds its commitment toward returning value to its
shareholders.
Hormel has a proven track record of
successful acquisitions and integration of businesses over the
years. Hormel’s retail business and branded stores continue to
benefit from its investment on new advertising campaigns. Thus,
such successful brand building and subsequent sales growth hold
significant growth potential for the upcoming quarters.
However, our outlook is not
completely free from risks. 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.
Also, competition in the Grocery Products segment continues to
remain a drag on profits.
Hormel’s operations and financial
results are largely dependent on the cost and supply of raw
material. As a result, constantly changing market forces of supply
and demand remain nagging concerns. Moreover, a significant jump in
pork cold storage charges, continue to impact pricing of processed
meats.
Hormel’s strategy to grow through
acquisitions, though promising, imposes several potential risks for
the company. The cost of acquisition could impact its financial
results. The risks associated with foreign operations such as
government regulations, currency fluctuation cannot be
overlooked.
Based in Austin, Minnesota, Hormel
Foods Corporation is a leading manufacturer and marketer of various
meat and food products in the United States and internationally.
Hormel has a Zacks #3 Rank, which translates into a short-term (1-3
months) ‘Hold’ rating.
CONAGRA FOODS (CAG): Free Stock Analysis Report
HORMEL FOODS CP (HRL): Free Stock Analysis Report
KRAFT FOODS INC (KFT): Free Stock Analysis Report
TYSON FOODS A (TSN): Free Stock Analysis Report
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