Hormel stock has gained ~4% YTD
As of August 16, Hormel Foods’ (HRL) stock price has risen ~4% on a YTD (year-to-date) basis. The stock price could accelerate more after the third-quarter results. Wall Street analysts have given strong forecasts. The adjusted EPS is expected to increase 14.7% to $0.39 due to the lower tax rate and a 7.8% increase in net sales on a YoY basis.
What lies ahead?
Hormel Foods is focussed on product innovations to meet changing consumer preferences. Consumers are looking for healthier and on-the-go options. Hormel Foods aims to become a broader food company and expand its food services in a bid to be a global food company.
Apart from product innovation, the company has taken to inorganic expansion to drive its top line. The recent acquisitions of Fontanini, Columbus Craft Meats, and Ceratti have been helping the financial performance. Columbus Crafts is an accretive acquisition. Hormel Foods wants to expand in the fast-growing and lucrative deli market. Hormel Foods has created a new deli division within its Refrigerated Products segment by integrating all of the various deli businesses.
Hormel Foods has been rationalizing its supply chain. The company has deployed zero-based budgeting to its supply chain. As part of the supply chain transformation, Hormel Foods sold its processing facility at Freemont to WholeStone Farms. Hormel Foods expects the weakness in the Jennie-O Turkey Store segment to subside in fiscal 2019 due to expectations of a recovery in turkey prices.
Hormel Foods expects its sales and EPS to increase 5% and 10%, respectively, by 2020 due to these strategic endeavors.
However, rising freight and advertising costs could impact the company’s profitability. All of the packaged food companies are moving towards healthier and organic food options, which will likely make the landscape very competitive.