QUOTE AND NEWS
Market Intelligence Center  Aug 11  Comment 
A covered call identified by MarketIntelligececenter.com's patented algorithm on Hormel Foods Corp (HRL) could yield about 3.19% (8.88% annualized, for comparison purposes only) in 131 days. Pair a long position in the stock with the Dec. '14...
Benzinga  Aug 8  Comment 
Below are the top meat products stocks on the NYSE and the NASDAQ in terms of gross margin. The trailing-twelve-month gross margin at BRF SA (NYSE: BRFS) is 25.80%. BRF's PEG ratio is 0.85. The trailing-twelve-month gross margin at Hormel...
Market Intelligence Center  Aug 5  Comment 
Option-trade picking algorithms patented by MarketIntelligenceCenter.com found a trading opportunity with Hormel Foods Corp (HRL) that should provide a 4.21% return in just 137 days. Sell one Dec. '14 call at the $45.00 level for each 100 shares...
SeekingAlpha  Jul 24  Comment 
By Dividends4Life: Linked here is a detailed quantitative analysis of Hormel Foods Corp. (NYSE:HRL). Below are some highlights from the above linked analysis: Company Description: Hormel Foods Corp. is a multinational manufacturer and marketer...
Market Intelligence Center  Jul 18  Comment 
After Thursday’s trading in Hormel Foods Corp (HRL) the algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center picked out a trade that offers a 2.44% or 5.74% (for comparison purposes only), while providing 8.35% downside...
Motley Fool  Jul 11  Comment 
Hormel Foods' impressive growth is proving that Spam is more exciting than you might think, and a recent acquisition might pave the way for future growth.
Motley Fool  Jul 3  Comment 
The company will buy the Muscle Maker protein drink business for $450 million.
SeekingAlpha  Jul 2  Comment 
By The Value Investor: Hormel Foods (HRL) announced yet another deal after making a string of acquisition in recent years. This time it acquired CytoSport, adding to its protein business in a move that will allow Hormel to report sales of $10...
TheStreet.com  Jul 2  Comment 
NEW YORK (TheStreet) -- Hormel Foods Corp. was downgraded to "neutral" from "outperform" at Credit Suisse this morning. The firm said it lowered its rating on the food products marketer based on a valuation call. Separately, on Monday, Hormel...
StreetInsider.com  Jul 1  Comment 
* Hormel Foods (NYSE: HRL) has entered into a definitive agreement to acquire CytoSport Holdings, Inc., maker of Muscle Milk® products. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals in...




 

The company's financial results and margins are tied closely to the cost and supply of pork, poultry, and feedstuff commodities prices like grain, which are the principal costs in raising livestock; corn prices in particular have risen since 2007 as ethanol producers have increased demand for the grain. The company generally enters into long-term hedging arrangements with suppliers, but major fluctuations in price or supply disruptions can adversely impact results. In the longer term, consumption in increasingly wealthy countries such as China may be particularly attractive to Hormel given its strong portfolio of branded meat products.

Company Overview

Business Financials

In 2009, HRL earned a total of $6.53 billion in total revenues. This was a decline from its 2008 total revenues of $6.75 billion. Despite this decrease in total revenues, HRL's net income increased. Between 2008 and 2009, HRL's net income increased from $286 million in 2008 to $343 million in 2009.[1]

Key Trends, Risks and Forces

Supply and price of inputs (live pork and poultry)

Hormel is heavily dependent upon favorable pricing and availability of live hogs and poultry in making its foods, as well as the commodity inputs that are required to feed the animals (Grains Prices, corn, etc). Major increases in price or major shocks to or shifts in supply could increase costs and deteriorate margins. Hormel believes its long-term hedging contracts to “lock in” current prices, as well as its ability to partially pass on costs to consumers through price increases, are sufficient to mitigate risk. However, the “spot” hog market (i.e. buying hogs without a long-term contract) is steadily on the decline, and it is possible that underutilized slaughterhouses lead to increases in Hormel’s raw materials. Also, grain prices have been rising and can be volatile, further increasing the volatility and potential contraction of margins.

Ability to brand and market value-added meat products

About 80% of packaged meat products are branded, as the companies that sell them attempt to differentiate their product and leverage pricing power by staying "top of mind" in the grocery store (also see Private Label Trends). Hormel's brands are vitally important to the company's margins and ability to sell larger volumes than its undifferentiated competitors. The quality of the company's products and strength of the Hormel name vis-a-vis similarly successful meat brands (e.g., Tyson Foods (TSN)) is a key determinant of success going further. Furthermore, the ability of Hormel to develop the same brand strength in increasingly wealthy international markets like China, will be crucial in determining success going forward. As a result, HRL does not need to rely upon private labels to sell its volume of goods- it is able to sell its products as branded items, thereby ensuring relatively comfortable margins.

Growth abroad

While the company's domestic market (U.S.) are fairly mature, other markets, including China, represent attractive prospects for more organic growth. The company particularly notes that its Chinese operations have been reporting strong top and bottom line growth, and management recognizes China as a key area for Hormel's growth. As China becomes more economically mature and consumers begin to value Hormel’s brands, the company can benefit from strong growth in this rapidly expanding market and is pursuing initiatives to grow its business there. Whether HRL successfully competes against China's domestic brands as well as international competitors remains to be seen.

Disease outbreaks

The company is subject to the possibility of animal disease outbreaks that might threaten sales, hamper margins, or lead to reputational damage if humans were ever to become infected. Furthermore, government intervention or restrictions following an outbreak could lead to adverse results.

Competition

Hormel competes largely with similarly positioned large providers of packaged meat products that one might typically find on any grocery store shelf. These include Tyson Foods (TSN), Smithfield Foods (SFD), Pilgrim's Pride (PGPDQ), and Sanderson Farms (SAFM).

Footnotes

  1. HRL 10-K 2009 Item 6 Pg. 12
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