Stock of the Day

October 12, 2022

Hormel Foods (HRL)

$30.46
-$0.25 (-0.8%)
Market Cap: $16.76B

About Hormel Foods

Hormel Foods Corporation develops, processes, and distributes various meat, nuts, and other food products to retail, foodservice, deli, and commercial customers in the United States and internationally. It operates through three segments: Retail, Foodservice, and International segments. The company provides various perishable products that include fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamoles, and bacons; and shelf-stable products comprising canned luncheon meats, nut butters, snack nuts, chili, shelf-stable microwaveable meals, hash, stews, tortillas, salsas, tortilla chips, nutritional food supplements, and others. It sells its products under the HORMEL, ALWAYS TENDER, APPLEGATE, AUSTIN BLUES, BACON 1, BLACK LABEL, BREAD READY, BURKE, CAFÉ H, CERATTI, CHI-CHI'S, COLUMBUS, COMPLEATS, CORN NUTS, CURE 81, DAN'S PRIZE, DI LUSSO, DINTY MOORE, DON MIGUEL, DOÑA MARIA, EMBASA, FAST N EASY, FIRE BRAISED, FONTANINI, HAPPY LITTLE PLANTS, HERDEZ, HORMEL GATHERINGS, HORMEL SQUARE TABLE, HORMEL VITAL CUISINE, HOUSE OF TSANG, JENNIE-O, JUSTIN'S, LA VICTORIA, LAYOUT, LLOYD'S, MARY KITCHEN, MR. PEANUT, NATURAL CHOICE, NUT-RITION, OLD SMOKEHOUSE, OVEN READY, PILLOW PACK, PLANTERS, ROSA GRANDE, SADLER'S SMOKEHOUSE, SKIPPY, SPAM, SPECIAL RECIPE, THICK & EASY, VALLEY FRESH, AND WHOLLY brands through sales personnel, independent brokers, and distributors. The company was formerly known as Geo. A. Hormel & Company and changed its name to Hormel Foods Corporation in January 1995. Hormel Foods Corporation was founded in 1891 and is headquartered in Austin, Minnesota.

Hormel Foods Bull Case

Here are some ways that investors could benefit from investing in Hormel Foods Co.:

  • The company recently reported earnings per share (EPS) of $0.35, meeting analysts' expectations, which indicates stable financial performance.
  • Hormel Foods Co. has a solid return on equity of approximately 10.95%, suggesting effective management and profitability relative to shareholder equity.
  • The current stock price is around $30.40, which may present a buying opportunity for investors looking for value in the food sector.
  • The company has declared a quarterly dividend of $0.29 per share, reflecting a commitment to returning value to shareholders, with an annualized dividend yield of about 3.89%.
  • Revenue for the latest quarter increased by 0.3% year-over-year, indicating growth potential in a competitive market.

Hormel Foods Bear Case

Investors should be bearish about investing in Hormel Foods Co. for these reasons:

  • The company’s revenue of $2.90 billion fell slightly short of analysts' expectations, which could raise concerns about future growth prospects.
  • Hormel Foods Co. experienced a decrease in EPS from $0.38 in the same quarter last year, indicating potential challenges in maintaining profitability.
  • The dividend payout ratio is currently high at 84.67%, which may limit the company's ability to reinvest in growth opportunities.
  • Recent insider selling, with a director offloading 4,500 shares, could signal a lack of confidence in the company's short-term performance.
  • Analysts have mixed ratings on the stock, with several maintaining a "hold" rating, suggesting uncertainty about its future performance.

Hormel Foods is More than Just Spam

Written By Jea Yu on 10/10/2022

Hormel Foods is More than Just Spam

Pre-packaged global food and snacks brand Hormel Foods (NYSE: HRL) has seen its top and bottom lines surge from the pandemic as consumers stockpiled endless amounts of its products, especially Spam. Spam has earned a not-so-flattering meaning as in sending out unsolicited and unwanted e-mails or digital communications in bulk. People may hate electronic spam, but they sure love the real Spam. This is evidenced by over seven straight years of record sales growth, obviously accelerated by the COVID-19 pandemic. Hormel has evolved from a one-trick pony into a global food and snack brand beyond just Spam. It’s diverse portfolio of popular brands also includes Skippy, Jennie-O, Dinty Moore, Chi-Chi’s, Corn Nuts, Lloyd’s Barbecue Co., Wholly Guacamole, Columbus Craft Meats and recently Planters. It competes with portfolios owned by brands like Conagra (NYSE: CAG), Campbell (NYSE: CPB), J.M. Smucker (NYSE: SJM), and Kraft Heinz (NYSE: KHC). Hormel’s brands hold the #1 and #2 market share spots in over 40 categories sold in over 80 countries. While globalization has helped increase its reach and scale, it has also caused pain from inflationary pressures, logistics costs and a strong U.S. dollar. These headwinds have caused the Company to lower its earnings estimates, but Hormel is seeing some stabilization emerge.

History of the Mystery Meat

Spam was created by George Hormel and made its debut as a cheap, portable, and non-perishable canned cooked pork meal sent to soldiers during World War 2. In fact, over 100 million pounds of Spam was shipped to feed U.S. soldiers during the war by Uncle Spam. It was a staple for soldiers (often against their wishes) and consumers throughout the Great Depression. The name Spam was concocted by combining the words “spice” and “ham” and was marketed as a ready-to-eat food to complement any meal from breakfast Spam and eggs and Spam and pancakes to Spam-wiches as it was dubbed the “miracle meat” in early ad campaigns. The 85-year old canned meat is considered essential survival food with its “indefinite” shelf life. Although, there is an “enjoy by” date on each can, it’s freshness is best when consumed within two to seven years. Spam consists of pork shoulder and chopped ham as well as potato starch to bind everything together, water, sodium nitrate as a preservative, and sugar canned at high heat.

The Contagion

American soldiers introduced Spam to Asian countries during wars and rebuilding efforts. Spam represented a piece of American culture and became phenomenally popular in Asian nations like South Korea, Guam, the Philippines, and Japan. It’s most popular in Hawaii where its per person consumption is the highest in the states. In Hawaii, Spam is considered the “Hawaiian Steak” as Hawaiians eat an average of five cans per year. Guam citizens consume an average of a whopping 16 cans be year making it the Spam capital country of the world. It’s limited edition pumpkin spice Spam sold for over $100 per can on eBay (NASDAQ: EBAY) as recently as September 2022. It’s attracted a new generation of consumer with younger “foodies”. There is a Spam museum in Austin, Minnesota that received over 100,000 tourists annually. Spam has become trendy as Asian chefs have reintroduced it as an ingredient in culinary creations and menu items. Spam is back and more popular than ever.

Headwinds Make Impact

On Sept. 1, 2022, Hormel released its fiscal third-quarter 2022 results for the quarter ending July 2022. The Company reported an adjusted earnings-per-share (EPS) profit of $0.40 excluding non-recurring items missing consensus analyst estimates for a $0.41 by (-$0.01). Revenues grew by 6% year-over-year (YOY) to $3.03 billion beating analyst estimates for $3 billion. Hormel CEO Jim Snee commented, "We delivered another quarter of record sales and double-digit operating income growth. In the current environment, delivering seven straight quarters of record sales and four consecutive quarters of earnings growth is a notable achievement and speaks to the effectiveness of our strategy and the importance of our brands in uncertain times.”

Downside Guidance

Hormel issued downside guidance for fiscal full-year 2022 EPS of $1.78 to $1.85 versus $1.88 consensus analyst estimates. Fiscal full-year 2022 revenues are expected between $12.2 billion to $12.8 billion versus $12.41 billion analyst estimates. CEO Snee added, "We expect elevated cost inflation to persist, primarily related to operations, logistics, and raw material inputs. As a result, we are revising our full-year earnings guidance range. We view the majority of the escalated cost pressures we are currently absorbing as transient and likely to subside over the coming quarters.”

Hormel Foods is More than Just Spam

Here’s What the Charts Say

Using the rifle charts on the weekly and daily time frames provides a precise view of the landscape for HRL stock. The weekly rifle chart peaked and reversed off the $51.58 Fibonacci (fib) level. The weekly downtrend is led by the falling 5-period moving average (MA) at $45.90 followed by the 15-period MA at $47.79. Shares collapsed through the weekly 50-period MA at $48.05 and the weekly 200-period MA at $46.04. The weekly lower Bollinger Bands (BBs) sit at $42.45 as the weekly stochastic falls to the 20-band. The weekly market structure low (MSL) buy triggered on the breakout through $42.08. The daily rifle chart triggered another breakdown led by the falling 5-period MA at $46.21 followed by the 15-period MA at $45.77. The daily lower BBs sit at $44.45 as the stochastic formed a pretzel mini inverse pup at the 40-band. The daily BBs are expanding after a compression period which bodes more downside to come. Attractive pullback levels sit at the $43.70 fib, $42.29 fib, $40.56 fib, $39.20 fib, $38.23 fib, and the $35.67 fib level.       

Recent News