Premium meat products company Hormel Foods Corporation HRL is scheduled to report first-quarter fiscal 2018 (ended January 2018) results on Feb 22, before the market opens.
Over the last four quarters, the company recorded an average negative earnings surprise of 3.12%. A supply glut in the turkey market and inflation in the prices of some major inputs such as pork bellies and beef trim have been weighing over Hormel’s performance for the past few quarters.
However, it should be noted that the company’s adjusted earnings of 41 cents per share in fourth-quarter fiscal 2017 surpassed the Zacks Consensus Estimate by a penny. Notably, our proven model shows that Hormel’s earnings will likely beat estimates in the quarter under review.
Why a Likely Positive Surprise?
Hormel has the right combination of the two key ingredients.
Zacks Rank & ESP: Hormel’s favorable Zacks Rank #3 (Hold), when combined with an Earnings ESP of +10.94%, predicts a likely earnings beat.
Hormel Foods Corporation Price and EPS Surprise
Hormel Foods Corporation Price and EPS Surprise | Hormel Foods Corporation Quote
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
What’s Driving the Better-Than-Expected Earnings?
Hormel anticipates that elevated demand for its finest brands, such as Spam, Dinty Moore, Skippy, Wholly Guacamole, Herdez, Natural Choice, black label bacon, Hormel Pepperoni and Justin's, will bolster revenues in the to-be-reported quarter.
Moreover, the company’s focus on making more diligent marketing and advertising moves from the beginning of this calendar year will likely help improve top-line results in the fiscal first quarter.
Hormel also believes that the strategic acquisition of Columbus Manufacturing, Inc. (completed in November 2017), Fontanini brand from Capitol Wholesale Meats, Inc (completed in August 2017) and the Ceratti brand from Cidade do Sol (August 2017) will drive its top- and bottom-line results in the quarters ahead.
Furthermore, the company’s decision to consolidate the Grocery Products and Specialty Foods segments from the beginning of fiscal 2018 is anticipated to generate additional revenues and cost synergies going forward.
Notably, the Zacks Consensus Estimate for Hormel’s Refrigerated Foods and Grocery Products segments are currently pegged at $1,226 million and $432 million respectively for the fiscal first quarter, higher than the corresponding tallies of $1,123 million and $418 million generated in the prior-year quarter.
Stocks to Consider
Here are some stocks in the Zacks Consumer Staples sector that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:
Boston Beer Company, Inc. SAM sports a Zacks Rank of 1 (Strong Buy) and has an Earnings ESP of +29.18%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Craft Brew Alliance, Inc. BREW carries a Zacks Rank of 2 (Buy) and has an Earnings ESP of +42.86%.
Lamb Weston Holdings Inc. LW also holds a Zacks Rank of 2 and has an Earnings ESP of +1.91%.
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