Stock (Symbol) |
Hormel (HRL) |
Stock Price |
$36 |
Sector |
| Food & Necessities |
Data is as of |
| July 8, 2016 |
Expected to Report |
| Aug 18 |
Company Description |
 Hormel Foods Corporation is a multinational manufacturer and marketer of food and meat products. The Company has five segments: Grocery Products, which consists of the processing, marketing and sale of shelf-stable food products sold primarily in the retail market; Refrigerated Foods, which consists of the processing, marketing and sale of branded and unbranded pork and beef products for retail, foodservice and fresh product customers; Jennie-O Turkey Store, which consists of the processing, marketing and sale of branded and unbranded turkey products for retail, foodservice and fresh product customers; Specialty Foods, which consists of the packaging and sale of private label shelf stable products, nutritional products, sugar and condiments to industrial, retail and foodservice customers, and International & Other, which includes the Hormel Foods International operating segment, which manufactures, markets and sells the Company products internationally. Source: Thomson Financial |
Sharek’s Take |
Hormel (HRL) stock cracked from $39 to $35 after the company reported last qtr’s earnings. Hormel was established in 1891 as a producer of fresh pork products, and in the 1920s distributed its products on vans driven by salesmen. In 1926 it developed the world’s first canned ham, and then went public in 1928. In the 1930s Dinty Moore beef stew, Hormel Chili and SPAM were invented. By 1959 the one-billionth can of SPAM, which consists of just pork and water, was produced. Turkey processor Jennie-O was acquired in 1986, Lloyd’s BBQ in 2005, Skippy peanut butter in 2013, Muscle Milk in 2014 and Applegate — the #1 brand in natural and organic prepared meats — in 2015. When the company announced last qtr’s earnings it also said it acquired Justin’s, a specialty nut butter company. I think this is a great move as Justin’s Nut Butters get consistently high grades from customers and compliments the SKIPPY brand. Hormel is a very safe stock has paid a dividend for 88 years, increased it the past 50 years, and has delivered year-over-year profit growth in 27 of the past 30 years. Today management strives for 5% sales growth and 10% profit growth each year. HRL had been rising as investors chose value over growth, but it got so high that I cut my position in half last qtr. Now the stock is Fairly Valued here. |
One Year Chart |
 Profits have been growing rapidly the past few qtrs. Estimates of 25%, 11%, 0% and 2% for the next 4 qtrs show growth could be slowing in 2017. But I think it’s too early to tell as management has been increasing qtrly estimates for the last year. Last qtr with the P/E at 28 I sold half my shares, and that was spot on. Now with a P/E of 23, the stock is where it should be. |
Fair Value |
 One thing that caught my attention this qtr is analysts predict profits of $1.59 this year, $1.62 next year and $1.67 the year after. That’s hardly any profit growth. Are they seeing something I’m not? Or will estimates increase? It’s too early to tell. What I do know is this stock was selling for 20 to 25 times earnings the past few years and now is right in the middle of that range now. |
Bottom Line |
 Hormel seems to have completed a parabolic move higher, thus I think the recent correction is good for the stock. But at this price I think the HRL’s fairly valued and with 2%-3% profit growth expected the next two years I wouldn’t make a big investment at this time. Still, this is a solid conservative stock that’s been growing since the Great Depression. That says speaks volumes — thus conservative investors should keep a half position. HRL ranks 28th of 38 stocks in the Conservative Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 28 of 38 |
