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BMO Capital Markets Upgrades Hormel Foods to ‘Outperform’

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Price movement

Hormel Foods (HRL) has a market cap of $20.1 billion. Its stock rose by 4.4% to close at $38.66 per share on August 19, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 4.3%, 4.9%, and -1.1%, respectively, on the same day. HRL is trading 5.5% above its 20-day moving average, 7.3% above its 50-day moving average, and 1.1% above its 200-day moving average.

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Related ETFs and peers

The Fidelity MSCI Consumer Staples Index ETF (FSTA) invests 0.63% of its holdings in Hormel Foods. The ETF tracks a market cap–weighted index of stocks in the US consumer staples sector. The YTD price movement of FSTA was 9.4% on August 19.

The SPDR S&P 500 ETF (SPY) invests 0.05% of its holdings in Hormel Foods. The ETF tracks a market cap–weighted index of US large- and mid-cap stocks selected by the S&P Committee.

The market caps of Hormel Foods’ competitors are as follows:

  • Tyson Foods (TSN): $27.2 billion
  • ConAgra Foods (CAG): $20.6 billion

Hormel Foods’ rating

BMO Capital Markets has upgraded Hormel Foods’ rating to “outperform” from “market perform” and set the stock’s target price at $44.0 per share.

TheStreet Ratings rated the stock a “buy” with a score of “A-.”

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Performance in fiscal 3Q16

Hormel Foods reported fiscal 3Q16 net sales of $2.3 billion—a rise of 4.5% compared to net sales of $2.2 billion in fiscal 3Q15. Sales from the Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International and Other segments rose by 2.9%, 9.4%, 20.0%, and 5.2%, respectively. Sales from the Specialty Foods segment fell by 25.0% in fiscal 3Q16, compared to fiscal 3Q15. The company’s gross profit margin and operating income rose by 10.4% and 18.9%, respectively, in fiscal 3Q16, compared to the same period last year.

Its net income and EPS (earnings per share) rose to $195.7 million and $0.36, respectively, in fiscal 3Q16, compared to $146.9 million and $0.27, respectively, in fiscal 3Q15.

Hormel Foods’ cash and cash equivalents and inventories rose by 9.3% and 4.1%, respectively, in fiscal 3Q16, compared to fiscal 4Q15. Its current ratio rose to 1.8x, and its DE (debt-to-equity) ratio fell to 0.45x in fiscal 3Q16, compared to current and DE ratios of 1.7x and 0.53x, respectively, in fiscal 4Q15.

Projections

Hormel Foods expects to report EPS of $1.60–$1.64 for fiscal 2016.

It expects a rise in sales from SKIPPY peanut butter products, Wholly Guacamole dips, and Muscle Milk protein for fiscal 4Q16.

In the next part of this series, we’ll look at Helen of Troy (HELE).

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