Shares of Hormel Foods Corporation (HRL) hit a new 52-week high of $55.40 on Nov 14. However, the stock closed the trading session slightly lower at $54.50. Over the past one year, the stock has gained roughly 27.8%. Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has enough fundamentals that may further drive its price upward. The stock is currently trading at a forward P/E of 21.27x and has a long-term earnings growth expectation of 8.0%.
Growth Drivers
Hormel Foods generated better-than-expected results in the third quarter of fiscal 2014. Adjusted earnings of 51 cents per share comfortably surpassed the Zacks Consensus Earnings Estimate and the year-ago tally by 6.3% and 21.4% respectively. Net revenue climbed 5.8% year over year, primarily on improved sales in the company’s Specialty Foods, Refrigerated Foods and International & Other business segments.
With the market demand for many of its popular products steadily increasing over time, Hormel Foods expects to generate superior results in the upcoming quarters. The company’s profitability and revenue margin can remarkably improve in the long run, provided it is able to check the high input costs of its Grocery Products and Refrigerated Foods segments.
Additionally, Hormel Foods possesses strong goodwill in the market. The company invests large sums of money in social welfare activities like funding rural communities or providing nutritional food products to patients. Such initiatives will hopefully enhance stakeholders’ trust in the company.
Since 1891, Hormel Foods brand has enjoyed popularity across the prominent marketplaces of China, England, U.S., Japan, Mexico, Australia, Canada and South Korea. Offering services through five major business segments, the company provides high quality consumer-branded food and meat products to its clientele.
In fiscal 2015, Hormel Foods expects all segments to grow from its current performance levels. In addition, recently acquired assets of CytoSport Holdings, Inc., the renowned Muscle Milk producer, will add $370 million to the company’s revenue. The acquisition is expected to be accretive to fiscal 2015 earnings per share of the organization.
Other Stocks to Consider
Better-ranked stocks in the industry that are worth considering include Pilgrim's Pride Corporation (PPC), Sanderson Farms, Inc. (SAFM) and Tyson Foods, Inc. (TSN). While Pilgrim's Pride currently sports a Zacks Rank #1 (Strong Buy), both Sanderson Farms and Tyson Foods carry a Zacks Rank #2 (Buy).
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