KeyBanc Capital Markets Rated Hormel Foods as ‘Sector Weight’

Price movement

Hormel Foods (HRL) has a market cap of $17.9 billion. It rose 1.6% to close at $33.81 per share on December 2, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -5.7%, -10.5%, and -13.2%, respectively, on the same day.

HRL is trading 5.0% below its 20-day moving average, 8.4% below its 50-day moving average, and 10.7% below its 200-day moving average.

KeyBanc Capital Markets Rated Hormel Foods as ‘Sector Weight’

Related ETF and peers

The Fidelity MSCI Consumer Staples ETF (FSTA) invests 0.63% of its holdings in Hormel Foods. The YTD price movement of FSTA was 1.8% on December 2.

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

  • Tyson Foods (TSN) — $20.6 billion
  • ConAgra Brands (CAG) — $16.2 billion

Hormel Foods’s rating

On December 2, 2016, KeyBanc Capital Markets initiated its coverage of Hormel Foods with a “sector weight” rating.

Hormel Foods’s performance in fiscal 4Q16

Hormel Foods (HRL) reported fiscal 4Q16 net sales of $2.6 billion, a rise of 9.5% compared to its net sales of $2.4 billion in fiscal 4Q15. Sales from its Grocery Products, Refrigerated Foods, Jennie-O Turkey brand, and International & Other segments rose 16.4%, 7.6%, 28.8%, and 1.6%, respectively. Sales from its Specialty Foods segment fell 19.7% in fiscal 4Q16 compared to fiscal 4Q15.

The company’s gross profit margin and operating margin expanded by 220 basis points and 170 basis points, respectively, in fiscal 4Q16 compared to fiscal 4Q15.

HRL’s net income and EPS (earnings per share) rose to $243.9 million and $0.45, respectively, in fiscal 4Q16, compared to $187.2 million and $0.35, respectively, in fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, HRL reported net sales of $9.5 billion, a rise of 2.8% YoY (year-over-year). The company’s gross profit margin and operating margin expanded 320 basis points and 240 basis points, respectively, in fiscal 2016.

The company’s net income and EPS rose to $890.1 million and $1.64, respectively, in fiscal 2016, compared to $686.1 million and $1.27, respectively, in fiscal 2015.

Hormel’s cash and cash equivalents rose 19.6%, and its inventories fell 0.77% in fiscal 2016. Its current ratio rose to 1.9x, and its debt-to-equity ratio fell to 0.43x in fiscal 2016, compared to its current and debt-to-equity ratios of 1.7x and 0.53x, respectively, in fiscal 2015.

Hormel Foods expects EPS in the range of $1.71–$1.77 per share, or $1.68–$1.74 per share after excluding ~$0.03 per share from its Farmer John divestiture, in fiscal 2017.

Hormel’s dividend

Hormel Foods (HRL) declared a quarterly dividend of $0.17 per share on its common stock. The dividend will be paid on February 15, 2017, to shareholders of record at the close of business on January 17, 2017.

In the next part of this series, we’ll look at Pilgrim’s Pride (PPC).