Hormel Foods: Positive Stock Reaction to Fiscal 4Q15 Earnings



Positive reaction to earnings

Hormel Foods’ (HRL) stock reacted positively to its mixed fiscal fourth quarter results. It rose 3%, closing at $71.32 following the earnings release. On November 24, Hormel Foods Corporation reported its fourth quarter results, which ended October 25, 2015, and its full fiscal 2015 results.

The stock was trading in the range of $59–$61 for August and September. However, shares rose 2% at the beginning of October and started rising. They’ve been trading in the range of $63–$69 since then.

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The stock has benefited ~37% over the past year owing to high earnings growth, growth in net income, good cash flow from operations, and a solid financial position with reasonable debt levels. The stock didn’t just rise over the last year. It also rose faster. The stock rose another 3.1% following the company’s announcement of a proposed two-for-one stock split and closed at $73.55 on November 25. Management mentioned that this split shows their confidence in sales and earnings growth and also acknowledges their track record of providing shareholders with solid long-term returns.

Peers in the industry

Hormel is based in Austin, Minnesota, and along with its five segments, it produces and markets various meat and food products worldwide. It’s part of the processed and packaged food industry and the meat industry in particular. Its peers in the industry include Tyson Foods (TSN), General Mills (GIS), and ConAgra Foods (CAG). Tyson reported its fiscal 4Q15 results on November 23. The stock rose almost 10% following the earnings release.

General Mills and ConAgra will report their second quarter fiscal 2016 results on December 15 and December 22, respectively. Tyson, General Mills, and ConAgra closed at $49.85, $58.24, and $41.61, respectively, on November 25. The Guggenheim S&P 500 Equal Weight Consumer Staples ETF (RHS) invests 2.9% of its portfolio in HRL. It also invests 2.6%, 2.6%, and 2.5%, respectively, in TSN, GIS, and CAG, closing at $112.78 on November 25. The year-to-date return for RHS is 8.2% while HRL’s is 41.7%.


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