Shares of Hormel Foods Corporation (HRL) touched a new 52-week high of $46.12 during its trading session on Dec 2. This is an increase from the previous high of $45.53 reached on Nov 26.
Hormel closed the trading day on Dec 2 at $45.80, reflecting a solid year-to-date return of 45.6%. The trading volume for the session was 777.9K shares. The food products company, with a Zacks Rank #2 (Buy) has potential for further accretion. This is reflected by both its earnings growth rate of 10.1% over the next five years and earnings estimate revision for fiscal 2014.
Growth Drivers
Hormel’s results in the fourth quarter of fiscal 2013 were impressive. Adjusted earnings per share came in at 58 cents, up 18.4% from the year-ago quarter and 7.4% above the Zacks Consensus Estimate of 54 cents. Since the earnings release on Nov 26, shares have risen by 7.9%.
In the quarter, revenues grew 7.1% year over year to $2.3 billion. The improvement was a result of increased sales in four out of five segments. Additionally, the January acquisition of the Skippy peanut butter line was a major source of the sales hike.
The company’s operating profit expanded in all segments except the Specialty Foods segment, due to the loss of contract from a major customer. Moreover, management announced an 18% hike in annual dividend to 80 cents, marking an increase for the 48th consecutive year.
It is expected that the segments will continue improving in the subsequent quarters while the Specialty Foods segment is likely to recover from the recent loss. In fiscal 2014, lower grain and turkey commodity prices are estimated to work in the company’s favor, while high beef input costs and uncertainty of hog supplies are expected to offset these benefits to some extent. In view of the same, management projects its earnings per share in fiscal 2014 in the range of $2.17 to $2.27.
Other Stocks to Consider
Hormel currently has a market capitalization of $12.1 billion. Other stocks to watch out for in the industry include Omega Protein Corp. (OME), ConAgra Foods, Inc. (CAG) and The Hain Celestial Group, Inc. (HAIN). While Omega Protein has a Zacks Rank #1 (Strong Buy), ConAgra and Hain Celestial Group hold a Zacks Rank #2.
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