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Trade-Ideas: Hillshire Brands (HSH) Is Today's "Water-Logged And Getting Wetter" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Hillshire Brands (HSH) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Hillshire Brands as such a stock due to the following factors:

  • HSH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $32.5 million.
  • HSH has traded 957,838 shares today.
  • HSH traded in a range 227.3% of the normal price range with a price range of $1.00.
  • HSH traded below its daily resistance level (quality: 209 days, meaning that the stock is crossing a resistance level set by the last 209 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on HSH:

The Hillshire Brands Company manufactures and markets meat-centric food solutions worldwide. It operates in two segments, Retail and Foodservice/Other. Currently there are 2 analysts that rate Hillshire Brands a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Hillshire Brands has been 1.2 million shares per day over the past 30 days. Hillshire has a market cap of $4.0 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.61 and a short float of 1.8% with 2.17 days to cover.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Hillshire Brands as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and poor profit margins.

Highlights from the ratings report include:

  • HILLSHIRE BRANDS CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HILLSHIRE BRANDS CO turned its bottom line around by earning $1.49 versus -$0.12 in the prior year. This year, the market expects an improvement in earnings ($1.67 versus $1.49).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 2.6%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for HILLSHIRE BRANDS CO is currently lower than what is desirable, coming in at 27.96%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.26% trails that of the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food Products industry. The net income has significantly decreased by 93.2% when compared to the same quarter one year ago, falling from $599.00 million to $41.00 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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