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Oppenheimer Has Rated Hormel Foods ‘Perform’

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Price movement

Hormel Foods (HRL) has a market cap of $19.4 billion. It fell 0.85% to close at $36.37 per share on September 16, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 1.0%, 0.06%, and -7.0%, respectively, on the same day.

HRL is trading 3.9% below its 20-day moving average, 1.9% below its 50-day moving average, and 5.8% below its 200-day moving average.

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Related ETFs and peers

The Fidelity MSCI Consumer Staples 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 5.1% on September 16.

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-cap and mid-cap stocks selected by the S&P Committee.

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

  • Tyson Foods (TSN): $27.0 billion
  • ConAgra Foods (CAG): $19.2 billion

Hormel Foods’ rating

Oppenheimer has initiated coverage of Hormel Foods with a “perform” rating and set the stock’s price target at $38 per share.

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Performance in fiscal 3Q16

Hormel Foods reported fiscal 3Q16 net sales of $2.3 billion, a rise of 4.5% over $2.2 billion in fiscal 3Q15. Sales from its Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other segments rose 2.9%, 9.4%, 20.0%, and 5.2%, respectively. Sales from its Specialty Foods segment fell 25.0% between fiscal 3Q15 and fiscal 3Q16.

The company’s gross profit margin and operating income rose 10.4% and 18.9%, respectively, from fiscal 3Q15 to fiscal 3Q16. 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’s cash and cash equivalents and inventories rose 9.3% and 4.1%, respectively, from fiscal 4Q15 to fiscal 3Q16. Its current ratio rose to 1.8x, and its DE (debt-to-equity) ratio fell to 0.45x in fiscal 3Q16 compared to 1.7x and 0.53x, respectively, in fiscal 4Q15.

Projections

The company reaffirmed the following projections at the Barclays Global Consumer Staples Conference:

  • EPS of $1.60– $1.64 per share for fiscal 2016
  • a rise in sales for Skippy peanut butter products, Wholly Guacamole dips, and Muscle Milk protein for fiscal 4Q16

Board chair and CEO (chief executive officer) Jeffrey M. Ettinger “stated his confidence in the company’s ability to meet its growth goals of 5 percent top-line and 10 percent bottom-line in the years to come.”

Next, we’ll take a look at Constellation Brands (STZ).

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