We have issued an updated research report on the premium meat products company, Hormel Foods Corporation HRL on Mar 4, 2015. The company produces and sells a variety of meat and food products on a global basis. However, in spite of holding a high brand value in the market, the company is currently exposed to certain business headwinds.
Scopes for Improvement
Hormel Foods reported impressive results for first-quarter fiscal 2015. The top-and bottom-line results surpassed their respective year-ago tallies. The improvement was primarily driven by growth in Specialty Foods, Jennie-O Turkey Store and International & Other segments.
Market tailwinds like favorable input costs, productive turnkey markets and lower pork costs are expected to support revenue and margin growth in the upcoming quarters. On the basis of such favorable assumptions, the company has raised its non-GAAP diluted earnings guidance for fiscal 2015 to $2.50–$2.60 per share from the previous projection of $2.45–$2.55.
Furthermore, Hormel Foods is working diligently to improve its business on the back of competent solutions and value-added marketing strategies. We believe such strategic initiatives will generate better top-line results for the company, going ahead. The company also attempts to enhance its stakeholders’ value through efficient capital deployment programs, apart from extending donations for social causes.
Existing Business Issues
The company’s Refrigerated Food segment experienced a year-over-year decline in volumes and lower sales growth, due to impact from suspension of the Precept Foods joint venture and certain market uncertainties. On the other hand, unfavorable pricing conditions and higher expenses of meat inputs weighed on the Grocery divisions’ adjusted operating profit. If these issues are not addressed timely, it can severely hamper Hormel Foods’ revenues and margins in the near future.
Moreover, Hormel Foods conducts business in a highly competitive market. Sanderson Farms, Inc. SAFM, Tyson Foods, Inc. TSN and JBS S.A. JBSAY are some of its potential market rivals. Hence, owing to stiff market rivalry, Hormel Foods is always exposed to risks of market share loss, and any strategic initiative on part of its competitors can hurt its revenues. Again, being a multinational company, Hormel Foods also faces risks associated foreign currency fluctuations.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment