Yahoo Finance Hormel Foods (HRL) Exhibits Solid Prospects Despite Risks
Hormel Foods Corporation HRL is well-poised to benefit from its solid presence in the retail, foodservice and international markets in the quarters ahead. The company expects favorable demand for its leading retail brands and the foodservice business.
Going forward, increased brand investments, innovations and HRL’s Project Orion are likely to support its growth. Hormel Foods projects fiscal 2023 net sales in the range of $12.6-$12.9 billion, indicating 1-3% growth on a year-over-year basis.
The company remains focused on strategic investments to boost capacity. For instance, the company is on track to expand its SPAM product portfolio, supported by the launch of SPAM maple, the relaunch of its 7-ounce offering and investment in additional production capacity.
Management is also working on expanding the Columbus line of premium charcuterie products and adding capacity for higher-demand Planters products at Fort Smith. HRL is expected to incur $280 million in capital expenditures in fiscal 2023.
Hormel Foods is strengthening its businesses through the addition of assets. In fourth-quarter fiscal 2022, it acquired a minority stake in an Indonesia-based food and beverage company, PT Garudafood Putra Putri Jaya Tbk. The buyout has helped Hormel Foods expand its presence in Indonesia and Southeast Asia. In June 2021, HRL acquired snack company Planters for $3.35 billion. This apart, its buyout of Sadler's Smokehouse in March 2020 has strengthened its position in the foodservice space.
In the past three months, this Zacks Rank #3 (Hold) stock has returned 0.8% against the industry’s decline of 6.6%.
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However, Hormel Foods’ earnings have been under pressure due to higher inefficiencies in the supply chain stemming from increased inventory levels and lower turkey sales. In the second quarter of fiscal 2023, volumes in the Retail segment fell 7% year over year. The Foodservice segments volumes fell 1% in the fiscal second quarter. Volumes in the International unit went down 4%.
HRL continues to operate in a high-cost environment. However, it has been working on stabilizing margin pressures via pricing actions, operational cost management and supply-chain initiatives.
Stocks to Consider
Some better-ranked stocks are Coty Inc. COTY, Pilgrim's Pride Corporation PPC and Helen of Troy Limited HELE. COTY currently sports a Zacks Rank #1 (Strong Buy), and PPC and HELE carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Coty specializes in the retail and wholesale of beauty products worldwide. The Zacks Consensus Estimate for COTY’s current financial-year sales suggests 3.1% growth from the year-ago reported figure. The company has a trailing four-quarter earnings surprise of 145%.
Pilgrim's Pride is a producer and distributor of fresh, frozen and value-added chicken and other meat products. The Zacks Consensus Estimate for PPC’s current financial-year sales is expected to decline 67.4% from the year-ago reported figure. The company has a trailing four-quarter earnings surprise of 320.9%.
Helen of Troy is a provider of consumer products in the United States, Europe, Canada, the Middle East, Africa and the Asia Pacific. The Zacks Consensus Estimate for HELE’s current financial-year sales and earnings per share suggests declines of 3.2% and 6.9%, respectively, from the corresponding year-ago reported figures. The company has a trailing four-quarter earnings surprise of 9.3%.
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