Back to top

Why Hormel Foods is a Must-Add Stock to Your Portfolio?

Read MoreHide Full Article

The consumer staples sector is often regarded as an abode of defensive stocks. It is one of the most trusted even when economic conditions are not congenial. Thus, adding stocks from this basket usually lends more stability to investors’ portfolio.

We believe impressive labor market scenario and rising consumer confidence will benefit consumer staples stocks in the near future. Notably, Trump’s latest tax policy is anticipated to provide a big push to consumer goods companies and boost their investments.

Among the numerous potential gainers, adding Hormel Foods Corporation (HRL - Free Report) to your portfolio will be a promising investment move at the moment. Over the last six months, shares of this Zacks Rank #2 (Buy) company have rallied 6.5%.

Hormel Foods Corporation Price

 

Hormel Foods Corporation Price | Hormel Foods Corporation Quote

This stock not only carries a Zacks Rank #2 (Buy) but also flaunts an attractive VGM Score B.

Why to Grab the Stock?

Rich Product Portfolio: Elevated demand for on-trend brands such as Hormel Black Label bacon, SPAM, Muscle Milk and Wholly Guacamole dips and SKIPPY will likely bolster Hormel Foods’ near-term revenues. The company’s organic sales inched up nearly 1% in first-quarter fiscal 2018 (ended January 2018) on the back of strong sales of these popular brands.

Sound Marketing Moves: Hormel Foods expects that its near-term market share and aggregate sales will improve largely due to the company’s marketing initiatives. For instance, on Feb 26, the company launched the BE SMOOTH LIKE SKIPPY campaign in a bid to portray the deliciousness and smoothness of its peanut butter brand — SKIPPY. Through various videos, the campaign will showcase the recently-rolled out products under the brand, such as SKIPPY P.B. Bites.  

Acquisitions: Hormel Foods intends to fortify its business on the back of well-planned business acquisitions. In the fiscal first quarter of 2018, Hormel Foods’ revenues and profitability were largely boosted by its previously-made buyouts like CytoSport Holdings, Inc. (August 2014), Justin’s, LLC (June 2016), Fontanini brand from Capitol Wholesale Meats, Inc. (August 2017) and Ceratti brand from Cidade do Sol. (August 2017) and Columbus Manufacturing, Inc. (November 2017). Notably, the company expects that the Columbus buyout will drive its earnings in the upcoming quarters of 2018.  

Innovation: Ongoing efforts to enhance its product portfolio with innovative products will benefit Hormel Foods in the near future. The company recently introduced a deli division in its Refrigerated Foods segment. Hormel Foods stated that the division will primarily focus on inventing new on-trend deli branded products. The company estimates that this division currently possesses a capacity to generate nearly $1-billion yearly sales and will act as the next growth driver.

Profit Making Prospects: In the fiscal first quarter of 2018, Hormel Foods secured one-time tax benefits of 12 cents per share. The company believes implementation of the Tax Cuts and Jobs Act (in December 2017) will largely reinforce its commercial competency. On grounds of lower tax rates, Hormel Foods anticipates to generate cash flow benefit within $100-$140 million in fiscal 2018.

The company intends to fund new capital investments and provide higher returns to employees as well as shareholders with these proceeds. Hormel Foods believes these moves will help improve its margins. Notably, the company raised its earnings per share view for fiscal 2018 to the $1.81-$1.95 per share range from the 0prior guidance of $1.62-$1.72 per share.

Earnings Estimate Revision: Over the past 60 days, the Zacks Consensus Estimate for Hormel Foods moved up 6.6% to $1.77 for fiscal 2018 and 9.4% to $1.87 for fiscal 2019. The positive earnings estimate revisions indicate upbeat market sentiments and substantiate the Zacks Rank #2 for the stock.

Notably, the stock’s projected earnings per share (EPS) year over year growth rate for fiscal 2018 is currently pegged at 12.7%.

Other Stocks to Consider

Some other top-ranked stocks in the Zacks Consumer Staples sector are listed below:

Energizer Holdings, Inc. (ENR - Free Report) sports a Zacks Rank of 1 (Strong Buy). The company has pulled off a positive average earnings surprise of 21.23% for the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Craft Brew Alliance, Inc. (BREW - Free Report) carries a Zacks Rank of 2. The company has pulled off an outstanding positive average earnings surprise of 250.20% over the trailing four quarters.

Church & Dwight Company, Inc. (CHD - Free Report) carries a Zacks Rank of 2. The company generated a positive average earnings surprise of 6.61% during the same time frame.

Zacks Top 10 Stocks for 2018

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?

Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2018 today >>



More from Zacks Analyst Blog

You May Like