This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Hormel Foods: A Star in the Prepared Foods Business

Cramer wrote regarding Hormel's decision, "The company will now dominate lunch, particularly the-bring-your-own-lunch contingent -- perfect for a country where the average worker is making less and less each year. Hormel is the player in ham, the No. 1 sandwich meat; this buyout will now make it the No. 2 player in peanut butter, the second-most-favored sandwich. It's incredible how smart that is."

"Plus," Cramer pointed out, "Skippy fits perfectly into Hormel's Chinese strategy, as it can be the best-of-breed U.S. player in two foods that are loved in that country." Now I hear the cash register "ca-chinking" and the flow of new moneys heading for Hormel's drawer.

The five-year chart below is like a picture that paints a thousand words. It not only shows the price but also HRL's declining free cash flow yield (important for sustaining the dividend) and it's improving quarterly income from continuing operations. The purchase of Skippy should help with the free cash flow yield.

HRL Chart HRL data by YCharts

The next earnings date for Hormel isn't until Feb. 21. Meanwhile shareholders will be paid a 2% dividend yield-to-price based on Friday's average share price of around $34, a 2.7% price increase from Thursday's close. Friday's volume was double the three-month average-daily-volume.

The investment community is rewarding savvy leadership and accretive transactions. They also like the fact that last quarter HRL increased its year-over-year earnings-per-share by 13%. As of Jan. 3, HRL had total debt of only $250 million, but its levered free cash flow (TTM) was a healthy $356 million.

Those of us who don't own shares of HRL yet might want to wait until the "Skippy-deal" celebrating is over and the stock pulls back. For example, on Jan. 2, the intraday low price was $31.46. The takeaway here is that HRL has smart leadership and a bright future. Its CEO is a shining example of "... the kind we need to see from companies to propel their stocks higher despite severe Washington headwinds" according to Jim Cramer.

At the time of publication the author held no positions in any of the companies mentioned.

Most large cap stocks were once small and mid-cap stocks. Bryan Ashenberg is here to help you find the cream of the crop amongst the market chaos.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
HRL $60.67 0.00%
AAPL $109.27 0.00%
FB $88.26 0.00%
GOOG $600.70 0.00%
TSLA $241.93 0.00%

Markets

Chart of I:DJI
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASDAQ 4,683.9190 -49.5780 -1.05%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs