With stock valuations appearing on the full side these days, equity investors may wish to get a bit more defensive. One place to look is the food industry, which is noncyclical, relatively stable, and apt to hold up pretty well in the event of an economic slump or significant market correction. And one of the notable standouts in the space is Hormel Foods (HRL). Shares of the Austin, Minnesota-based food outfit have pushed higher over the past year, appreciating almost 25% in value, far more than the broad-based S&P 500 Index. In fact, the large-cap issue recently hit a fresh all-time high in the upper $50s after the company posted better-than-expected results for the January interim. (Fiscal years end on the last Saturday in October.) Earnings growth, which amounted to 21% during the quarter, is being driven by robust demand for Hormel’s core pork and turkey products, the introduction of more high-margined value-added products and a leveraging of the recently acquired Skippy peanut butter brand. Favorable input costs and healthy pricing trends are helping matters, too, lifting the operating margin to near-record levels. So, will this impressive bottom-line momentum persist in the coming periods? And how does the long-term picture look? In this brief article, we will attempt to address these questions by taking a look at Hormel’s business and performing an easy-to-follow SWOT analysis of the company, evaluating its Strengths, Weaknesses, Opportunities, and Threats.
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