TSC Ratings' Updates: Hormel Foods

The following ratings changes were generated on Tuesday, Feb. 10.

We've upgraded Hormel Foods(HRL Quote), which engages in the production and marketing of various meat and food products, from hold to buy. This rating is driven by the company's revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Revnue rose by 11.8% compared with the same quarter last year, trailing the industry average of 36.4% growth. ROE slightly decreased, outperforming both the industry and the S&P 500. EPS declined by 31.5%, but we expect the company's pattern of declining EPS over the past year to reverse in the coming year. Hormel's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying very successful management of debt levels, but its quick ratio of 0.72 is somewhat weak and could be cause for future problems. ...