QUOTE AND NEWS
Benzinga  Sep 5  Comment 
Recently, CNBC reported on a motorcycle made by Hormel Foods Corp (NYSE: HRL) that runs entirely on refined bacon grease. CNBC reporter Jane Wells bent down beneath a mounted biker as he revved up the engine and she smelt deep into the...
newratings.com  Sep 5  Comment 
WASHINGTON (dpa-AFX) - Hormel Foods Corp.'s (HRL) chairman, president and chief executive officer, Jeffrey Ettinger, highlighted strategy for Targeted Growth at the annual Barclays Back-to-School Consumer Conference in Boston, Mass. In...
Market Intelligence Center  Aug 28  Comment 
The patented algorithms that power MarketIntelligenceCenter.com's Artificial Intelligence Center found a trading opportunity with Hormel Foods Corp (HRL) that should provide a 2.02% return in just 51 days. Sell one Oct. '14 call at the $50.00...
SeekingAlpha  Aug 26  Comment 
By The Value Investor: Investors in Hormel Foods (NYSE:HRL) were pleased with the company's third quarter results which the company released last week. Stronger than anticipated sales and earnings triggered enthusiasm among investors. The company...
TheStreet.com  Aug 22  Comment 
Story updated at 9:50 a.m. to reflect market activity. NEW YORK (TheStreet) --aCredit Suisse raised its price target for Hormel Foods to $52 from $50 Friday, reiterating its "neutral" rating. Shares of Hormel gained 0.3% to $50.08 in morning...
Wall Street Journal  Aug 21  Comment 
Hormel Foods reported its fiscal third-quarter earnings jumped 21%, as the packaged-foods maker also said domestic pork supplies have improved after a deadly virus racked piglet populations this year.
Benzinga  Aug 21  Comment 
Hormel Foods (NYSE: HRL) shares moved up 5.31% to $50.40. The volume of Hormel Foods shares traded was 324% higher than normal. Hormel reported better-than-expected fiscal third-quarter profit. China Mobile Games and Entertainment Group (NASDAQ:...
TheStreet.com  Aug 21  Comment 
NEW YORK (TheStreet) -- Shares of Hormel Foods are higher by roughly 5%, following a top- and bottom-line earnings beat. TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio, took a closer look.a Read More: $16.65B Bank of...
Benzinga  Aug 21  Comment 
iDreamSky Technology (NASDAQ: DSKY) shares reached a new 52-week high of $21.60. iDreamSky Technology's trailing-twelve-month operating margin is 19.62%. Hormel Foods (NYSE: HRL) shares gained 4.97% to reach a new 52-week high of $50.24 after...
Wall Street Journal  Aug 21  Comment 
Hormel Foods reported its fiscal third-quarter earnings jumped 21%, as the packaged-foods maker also said domestic pork supplies have improved after a deadly virus racked piglet populations this year.




 

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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