QUOTE AND NEWS
Benzinga  Sep 16  Comment 
  Analysts at Credit Suisse initiated coverage on Boston Beer Co Inc (NYSE: SAM) with an Underperform rating. The price target for Boston Beer is set to $156. Boston Beer shares fell 0.41 percent to close at $164.50 on...
Forbes  Sep 13  Comment 
The best performing sector as of midday Tuesday is the Consumer Products sector, losing just 1.4%. Within that group, Hormel Foods Corp. (NYSE: HRL) and McCormick & Co., Inc. (NYSE: MKC) are two large stocks leading the way, with HRL showing a...
Forbes  Sep 13  Comment 
The most recent short interest data has been released for the 08/31/2016 settlement date, and we here at Dividend Channel like to sift through this fresh data and order the underlying components of the S&P 500 by "days to cover." There are a...
newratings.com  Sep 8  Comment 
WASHINGTON (dpa-AFX) - Hormel Foods Corp. (HRL) reaffirmed its fiscal 2016 EPS guidance range of $1.60 to $1.64. The company expressed confidence in its ability to meet growth goals of 5 percent top-line and 10 percent bottom-line in the years to...
Forbes  Sep 7  Comment 
In recent trading, shares of Hormel Foods Corp. (NYSE: HRL) have crossed above the average analyst 12-month target price of $38.58, changing hands for $38.65/share. When a stock reaches the target an analyst has set, the analyst logically has two...
newratings.com  Sep 7  Comment 
WASHINGTON (dpa-AFX) - Hormel Foods Corp. (HRL) announced that Jeffrey Ettinger will retire as chief executive officer on October 30, 2016. Ettinger will continue to serve as Hormel Foods chairman of the board. The Board of Directors elected...
MarketWatch  Sep 6  Comment 
Hormel Foods Corp. late Tuesday said Chief Executive Jeffrey Ettinger will retire on Oct. 30 but will continue to serve as chairman of the board. The company named Chief Operating Officer James Snee to succeed Ettinger as CEO. Hormel shares were...




 

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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