QUOTE AND NEWS
Benzinga  Mar 26  Comment 
Yongye International (NASDAQ: YONG) shares jumped 13.50% to touch a new 52-week high of $6.81 as Full Alliance raised Yongye going private offer to $7 per share. Garmin (NASDAQ: GRMN) shares rose 3.71% to reach a new 52-week high of $56.48...
StreetInsider.com  Mar 24  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Dividends/Hormel+Foods+Corp.+%28HRL%29+Declares+%240.20+Quarterly+Dividend%3B+1.7%25+Yield/9310779.html for the full story.
Benzinga  Mar 5  Comment 
Below are the top meat products stocks on the NYSE and the NASDAQ in terms of earnings estimate for the next quarter. Tyson Foods (NYSE: TSN) is likely to earn $0.77 per share in the June quarter. Tyson's trailing-twelve-month revenue is $34.77...
Benzinga  Feb 21  Comment 
Believe it or not, Spam, the legendary product of Hormel Foods (NYSE: HRL), is a delicacy in Asia. It is also served at L&L Hawaiian Barbecue, a chain in the United States that features grilled spam in the Saimin dish. Spam has been very good to...
Wall Street Journal  Feb 20  Comment 
Hormel Foods said fiscal first quarter earnings rose 18% but higher natural gas costs are diminishing the benefits from lower feed prices.
SeekingAlpha  Feb 20  Comment 
Hormel Foods (HRL) Q1 2014 Earnings Call February 20, 2014 9:00 am ET Executives Jana Haynes Jeffrey M. Ettinger - Chairman, Chief Executive Officer and President Jody H. Feragen - Chief Financial Officer, Executive Vice President...
Benzinga  Feb 20  Comment 
Hormel Foods (NYSE: HRL) reported an 18% rise in its fiscal first-quarter earnings. Hormel's quarterly profit surged to $153.3 million, or $0.57 per share, from a year-ago profit of $129.7 million, or $0.48 per share. Its sales climbed 6%...




 

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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