Piper Jaffray Rated Hormel Foods as ‘Overweight’

Price movement

Hormel Foods (HRL) has a market cap of $18.7 billion. It fell 2.1% and closed at $35.58 per share on January 9, 2017. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 2.2%, 5.1%, and 2.2%, respectively, on the same day. Hormel Foods is trading 1.6% above its 20-day moving average, 0.19% above its 50-day moving average, and 3.5% below its 200-day moving average.

Piper Jaffray Rated Hormel Foods as ‘Overweight’

Related ETF and peers

The Fidelity MSCI Consumer Staples ETF (FSTA) invests 0.63% of its holdings in Hormel Foods. FSTA’s YTD price movement was -0.06% on January 9.

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

  • Tyson Foods (TSN) – $22.6 billion
  • Conagra Brands (CAG) – $16.9 billion

HRL’s rating

On January 9, 2017, Piper Jaffray initiated the coverage of Hormel Foods with an “overweight” rating. It set the stock’s price target at $40.0 per share.

Performance in fiscal 4Q16

Hormel Foods reported fiscal 4Q16 net sales of $2.6 billion—a rise of 9.5% compared to $2.4 billion in 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.

Its 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, Hormel Foods 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 by 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 1.7x and 0.53x, respectively, in fiscal 2015.

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

Quarterly dividend

Hormel Foods 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 and final part of this series, we’ll discuss Procter & Gamble (PG).