QUOTE AND NEWS
Benzinga  Nov 14  Comment 
In a report published Friday, Credit Suisse analyst Robert Moskow reiterated a Neutral rating on Hormel Foods Corp (NYSE: HRL), and raised the price target from $52.00 to $57.00. In the report, Credit Suisse noted, “We are raising our Hormel...
Benzinga  Nov 6  Comment 
Analysts at BMO Capital downgraded Hormel Foods (NYSE: HRL) from Outperform to Market Perform. The price target for Hormel Foods has been raised from $53 to $58. Hormel Foods shares have surged 26.96% over the past 52 weeks, while the S&P...
Benzinga  Oct 10  Comment 
Exact Sciences (NASDAQ: EXAS) shares jumped 38.02% to reach a new 52-week high of $25.01 following the company's announcement that its stool DNA test to detect colorectal cancer has been approved for coverage by the Centers for Medicare and...
Motley Fool  Oct 8  Comment 
This dividend is rock solid, but what about the stock?
Market Intelligence Center  Oct 6  Comment 
The patented option trade-picking algorithms behind MarketIntelligenceCenter.com's Artificial Intelligence Center have selected a covered call trade on Hormel Foods Corp (HRL) that includes 6.37% downside protection. Sell one contract of the Mar....
SeekingAlpha  Oct 3  Comment 
By Chronic Bull: The rise in the sales of packaged protein-rich food in the U.S. has put protein at the center of other food deals. This includes Hormel Foods Corporation's (NYSE:HRL) acquisition of the Muscle Milk maker, CytoSport Holding Inc.,...
Market Intelligence Center  Oct 3  Comment 
For a hedged play on Hormel Foods Corp (HRL), MarketIntelligenceCenter.com’s option-trade picking algorithms recommend the Dec. '14 $50.00 covered call for a net debit in the $49.02 area. That is also the break-even stock price for the covered...
SeekingAlpha  Sep 29  Comment 
By Sure Dividend: In Part 8 of the 54 Part Dividend Aristocrats In Focus series, we will look into meat and consumer food business Hormel (NYSE:HRL). Hormel is the maker of various food products that are sold under recognizable brands like Skippy,...
SeekingAlpha  Sep 25  Comment 
By Balanced Investing: Hormel Foods Corporation (NYSE:HRL) is engaged in the processing of food products for retail, foodservice and fresh product customers. The company reports its operations under five sections: Grocery products, Refrigerated...
SeekingAlpha  Sep 24  Comment 
By Amal Singh: Hormel Foods (NYSE:HRL) posted record numbers for the third quarter on the back of strong demand for pork and turkey. In addition, strong sales of value-added products in its refrigerated foods, Jennie-O Turkey Store, and...




 

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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