Here's How Hormel Foods (HRL) Is Placed Ahead Of Q1 Earnings

Hormel Foods Corporation (NYSE:HRL) is slated to release first-quarter fiscal 2020 results on Feb 20. This meat products company’s earnings came in line with the Zacks Consensus Estimate in the last reported quarter. Further, the company delivered a positive earnings surprise of 2.6%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for fourth-quarter earnings has moved up a penny over the past 30 days to 46 cents per share. This suggests an increase of 4.6% from the year-ago period’s reported figure. The consensus mark for revenues is $2,361 million, indicating a marginal rise from the figure reported in the year-ago quarter.

Key Factors to Note

Hormel Foods has been benefiting from solid demand for brands like SPAM, Wholly, Jennie-O, Hormel Natural Choice, Hormel Gatherings, SKIPPY, Herdez, Columbus, Hormel Bacon 1 and Applegate. The company has been committed to making advertisement investments to support the growth of its brands. Additionally, the company focuses on launching products to meet consumers’ preferences. Notably, sales from product innovation have increased close to 15% over the past five years. Further, management, in its last earnings call, stated that it anticipates sales growth in fiscal 2020, buoyed by innovation and e-commerce.

Additionally, the company’s focus on strengthening business through acquisitions has been a key driver. To this end, the Ceratti acquisition has been aiding the International unit, while the Columbus and Fontanini buyouts have been driving the Refrigerated Foods unit. Notably, the Refrigerated Foods segment has been doing well for quite some time now on the back of a strong brand portfolio and effective strategies. Products like Hormel Bacon 1 and Hormel Fire Braised as well as retail sales of Hormel Black Label, Columbus, Hormel Natural Choice, Applegate and Hormel Gatherings drove segment sales in the last reported quarter. Value-added growth, effective pricing and innovation bode well for the segment. The consensus mark for the Refrigerated Foods unit’s sales is pegged at $1,362 million, up from $1,279 million reported in the year-ago period.

However, Hormel Foods continues to battle input cost inflation. Global trade volatility and the African swine fever are leading to input cost inflation in China and Brazil. Management expects input cost-related headwinds to persist throughout fiscal 2020. Also, management anticipates elevated protein prices for fiscal 2020. This may have had an impact on the bottom line in the quarter under review.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Hormel Foods this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hormel Foods has a Zacks Rank #2 and an Earnings ESP of +1.10%.

Other Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Monster Beverage Corporation (NASDAQ:MNST) has an Earnings ESP of +3.38% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Smucker (NYSE:SJM) has an Earnings ESP of +0.39% and a Zacks Rank #3.

Chewy Inc. (NYSE:CHWY) has an Earnings ESP of +23.33% and a Zacks Rank #3.

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