Hormel Foods Corporation (HRL - Free Report) has been a preferred investment pick, evident from the stock’s 14.7% increase in the past three months against the industry’s decline of 0.8%. Also, this meat products company hit a 52-week high of $41.69 yesterday, ultimately closing at $41.52.
That said, let’s take a peek at some of the factors aiding this Zacks Rank #3 (Hold) company and also delve into some of the aspects that pose threats.
Lucrative Buyouts Aid Growth
The company intends to strengthen its business on the back of strategic acquisitions. In the third quarter, the Fontanini acquisition (August 2017), the Ceratti brand buyout (August 2017) and the Columbus Manufacturing purchase (November 2017) supported revenues and profitability. The company anticipates that the successful integration of the Fontanini and Columbus businesses will continue to strengthen Hormel Foods’ portfolio, going forward.
Hormel Foods boasts a portfolio with strong brands that has been fueling its popularity and boosting growth. Stronger demand for brands like Hormel Black Label bacon, SPAM, Muscle Milk and Wholly Guacamole dips are expected to drive the company’s revenues in the upcoming quarters. Moreover, Hormel Foods believes that increasing popularity of other brands like The Natural Choice, Cafe H products and Hormel fire braised meats will drive its performance.
Hormel Brands is committed toward making strategic advertisement investments, which yielded in the third quarter of fiscal 2018. This was evident from improvements witnessed during the said period in brands like Skippy, Applegate, Natural Choice, Jennie-O, Herdez and Wholly Guacamole.
Consistent Returns to Shareholders
Hormel Foods regularly returns value through dividends and share buybacks, courtesy of healthy cash flows. In the first three quarters of fiscal 2018, the company generated cash worth $743.2 million from operating activities. This enabled the company to make year-to-date repurchases of 1.3 million shares for nearly $45 million. Also, it continued with the practice of paying dividends in the third quarter that marked its 90th year of consistent dividend payment.
Hurdles yet to be Overcome
While the aforementioned factors have been aiding Hormel Foods to stay in the green, there are certain underlying concerns which cannot be ignored. The volatile tariff environment for pork is a major obstacle among them. Further, soft turkey market challenges and escalated freight costs have been troubling the company for the past few quarters. Nevertheless, we expect the company’s strategic moves to cushion the aforementioned hurdles.
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