We issued an updated research report on premium meat products company, Hormel Foods Corporation (HRL Quick QuoteHRL - Free Report) on May 26, 2015. The company produces and sells a variety of meat and food products globally. Although the company holds a high brand value, it remains exposed to certain business headwinds.

Scopes for Improvement

Hormel Foods has been steadily improving its profitability. Superior product and process innovation, solid sales of value-added products and greater operational efficiency have been supporting the company’s margin and earnings growth. Based on these optimistic aspects, the company has raised its full-year fiscal 2016 adjusted earnings to the range of 1.56–$1.60 per share from the previous projection of $1.50–$1.56 per share. Moreover, the company aims to enhance its revenues through productive inorganic growth programs. The company also undertakes strategic acquisitions to tap the demand of variable edible products. Furthermore, the company is trying to boost its sales by reinforcing its existing product portfolio. This is also expected to enhance the top line and bottom line in the near term.

Existing Business Issues

The meat industry is going through a difficult phase as the highly contagious Avian influenza continues to create operational challenges for meat product producers like Hormel Foods. Going forward, such supply-chain challenges might adversely affect Hormel’s margins. Moreover, Hormel Foods’ international business revenues and margins remain exposed to risks of unfavorable currency fluctuations.

We also note that reduced contract packaging sales of the Specialty Foods’ segment, lower demand of U.S. export products and high pork input expenses in China have been weighing over Hormel Foods’ aggregate revenues. Moreover, the company operates in a highly competitive market, which raises risks of market share loss.

Other Stocks to Consider

Hormel Foods presently carries a Zacks Rank #3 (Hold). Some better ranked stocks within the industry include Tyson Foods, Inc. (TSN Quick QuoteTSN - Free Report) , AMC Networks Inc. (AMCX Quick QuoteAMCX - Free Report) and Carter's, Inc. (CRI Quick QuoteCRI - Free Report) . All the three companies currently holds a Zacks Rank #2 (Buy).

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