Hormel Foods (HRL, Financial) is doing well to tap the booming food market and has come up with impressive results that topped analyst estimates on both top and bottom lines last quarter. Hormel Foods managed to post such impressive numbers due to strong demand for pork, turkey, and other refrigerated products. The company also saw a terrific increase in profit, which again strengthened its market position. Seeing the growing demand for pork and turkey, management is confident for an even better performance in the future. Let us have a look at what Hormel Foods has more to offer to investors.
A strong performance
Hormel’s revenue rose by 6% to $2.28 billion from $2.16 million. This is an impressive improvement by Hormel, it again topped analysts’ estimates of $2.24 billion. Hormel’s profit for the third quarter also rose by 21% which was also better than expectations. Hormel is confident of posting better results, and as a result, has also posted an upbeat outlook and is expecting earnings in a range of $2.17 to $2.27 per share.
Looking at a 21% improvement in the profit clearly indicates that Hormel has much steam and the stock has more to go on the exchange. Its sales are growing continually and it indicates that the company is gaining good traction in the market. It is further focusing on various initiatives to improve its profitability. The company operates in five main segments, but Hormel must focus mainly on grocery product and speciality food segment which are not up to the mark as per the company’s expectation.
Moreover, to improve the operations in these two segments, Hormel is trying to focus on eradicating the weakness that it saw in the previous quarters. It is focusing on improving the performance of its core segment of canned meat and microwave meal item which suffered in the past due to aggressive pricing actions. It also focuses on maintaining the cost inputs for beef, pork and chicken to improve its margins in this segment.
Better times in the cards
Hormel is pleased with the performance of its products such as SKIPPY peanut butter and Hormel bacon toppings. Hormel is focusing on strengthening the presence of these products through various initiatives. It is planning for aggressive marketing for SKIPPY peanut butter during the back-to-school season.
It is seeing some good traction for products in its food service business which includes some of the popular products from Hormel such as Hormel FIRE BRAISED Meats, Hormel Bacon fully cooked bacon, and Hormel fully cooked sausage. In order to further support this growth, Hormel has also increased internal utilization of raw materials in these value added products along with higher pricing on key retail items to mitigate margin expansion.
Hormel has also launched new products to strengthen its product portfolio. It has introduced four varieties each with flatbread, egg, cheese and breakfast meat. Considering the growing pork and turkey demand, Hormel expects Jennie-O-Turkey to be a primary growth driver for it in future.
Besides this, Hormel is also expecting good contribution from the CytoSport acquisition. It is keeping its eye on the benefits that Hormel’s protein rich sports nutrition operations might see with this muscle milk brand in this fast-growing sport nutrition space.
