We issued an updated research report on premium meat products company, Hormel Foods Corporation HRL on Jun 28, 2016. The company produces and sells a variety of meat and food products globally. Although the company holds a high brand value, it remains exposed to certain business headwinds.
Scopes for Improvement
Hormel Foods is steadily improving its profitability on the back of superior product and process innovation, solid sales of value-added products and greater operational efficiency. The company also remains on track to boost its revenues and margins via productive inorganic growth initiatives like strategic acquisitions. Buyouts of popular brands such as Applegate and Justin’s have strengthened the company’s existing product portfolio, thereby increasing its sales. Based on such optimistic aspects the company has raised its fiscal 2016 adjusted earnings guidance to the range of 1.56–$1.60 per share from the earlier projection of $1.50–$1.56 per share.
Existing Business Issues
The meat industry is going through a difficult phase as the highly contagious Avian influenza continues to create operational challenges for meat product producers like Hormel Foods. Going forward, such supply-chain challenges might adversely affect Hormel Foods’ margins. Moreover, Hormel Foods’ international business revenues and margins remain exposed to risks of unfavorable currency fluctuations.
We also note that reduced contract packaging sales of the Specialty Foods’ segment, lower demand of U.S. export products and high pork input expenses in China have been weighing over the aggregate revenues of Hormel Foods. Moreover, the company operates in a highly competitive market, which raises risks of market share loss.
Other Stocks to Consider
Hormel Foods currently carries Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Tyson Foods, Inc. TSN, Adidas AG ADDYY and Carter's, Inc. CRI. All the three companies presently hold a Zacks Rank #2 (Buy).
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