Will Q3 Earnings Hold A Surprise For Hormel (HRL) Stock?

Hormel Foods Corporation (NYSE:HRL) is slated to report third-quarter fiscal 2016 results before the opening bell on Aug 18.

The company beat estimates in each of the trailing four quarters with an average positive earnings surprise of 7.58%. Let’s see how things are shaping up for this announcement.

Factors to Play

Hormel Foods anticipates its improving segmental trade to drive top-line growth in the to-be-reported quarter. Also, the company expects its Grocery Products and Refrigerated Products’ segments to drive earnings in fiscal third quarter on the back of lower input costs and growth in value-added products’ category. In addition, the Jennie-O Turkey Store’s segment is expected to support revenue and earnings growth in the upcoming quarter, as overall production of turkey has improved. Also, higher export-led sales of MUSCLE MILK protein products, SKIPPY peanut butter and SPAM family products is expected to augment Hormel Foods’ international revenues in the fiscal third quarter.

We believe that the strategic acquisition of Justin’s, LLC would further help in boosting Hormel Foods’ revenues in the upcoming quarter. The buyout is likely to capture higher consumers’ demand for natural and organic foods, in turn, boosting the company’s top line.

However, certain industry-specific headwinds might depress results for the company in the quarter to be reported. Risks associated with Avian Flu, lower consumers’ brand loyalty, weak demand from sluggish emerging markets or Forex problems might hurt the quarterly results.

Share price of the company as of Aug 15, 2016 was $36.71 per share. We expect the release of fiscal third-quarter results to result in stock price movement in the near term.

HORMEL FOODS CP Price and EPS Surprise

HORMEL FOODS CP Price and EPS Surprise | HORMEL FOODS CP Quote

Earnings Whispers: Our proven model does not conclusively state that Hormel Foods is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this. That is not the case here as we will see below.

Zacks ESP: Hormel Foods has an Earnings ESP of 0.00% for the quarter as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 34 cents.

Zacks Rank: Hormel Foods carries a favorable Zacks Rank #3. However, a 0.00% ESP makes surprise prediction difficult.

Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

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 this quarter:

Summer Infant, Inc. (NASDAQ:SUMR) with an Earnings ESP of +66.67% and a Zacks Rank #1.

Francesca's Holdings Corporation (NASDAQ:FRAN) with an Earnings ESP of +11.11% and a Zacks Rank #2.

Pool Corp. (NASDAQ:POOL) with an Earnings ESP of +1.00% and a Zacks Rank #2.

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