Hormel Foods (HRL) Stock Price Target Raised at Credit Suisse
NEW YORK (TheStreet) -- Hormel Foods Corp. (HRL) - Get Report stock is gaining 0.98% to $67.72 in early morning trading on Wednesday after its price target was increased to $66 from $63 at Credit Suisse, which maintained a "neutral" rating on the stock.
The firm also increased its fiscal 2015 fourth quarter earnings estimate to 75 cents per share, surpassing the food company's implied guidance of 67 cents to 73 cents per share because of strength in the refrigerated foods unit.
"Our proprietary margin analysis of Hormel's refrigerated foods division indicates that its results are likely to exceed expectations," Credit Suisse said in an analysts note.
Industry-wide pork margins are exceeding expectations, while bacon margins are bouncing back and prices for value-added products, such as pepperoni, are remaining strong.
"We believe Hormel stock deserves a valuation premium for its best-in-class value-added business capabilities, its strong track record for acquisitions, and its impeccable balance sheet," analysts added.
Hormel foods is scheduled to report its fiscal 2015 fourth quarter financial results on November 24 before the market open.
Separately, TheStreet Ratings team rates HORMEL FOODS CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
We rate HORMEL FOODS CORP (HRL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HORMEL FOODS CORP has improved earnings per share by 5.9% 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. During the past fiscal year, HORMEL FOODS CORP increased its bottom line by earning $2.23 versus $1.94 in the prior year. This year, the market expects an improvement in earnings ($2.61 versus $2.23).
- Net operating cash flow has significantly increased by 104.89% to $244.51 million when compared to the same quarter last year. In addition, HORMEL FOODS CORP has also vastly surpassed the industry average cash flow growth rate of -33.08%.
- HRL's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.73 is somewhat weak and could be cause for future problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Food Products industry and the overall market on the basis of return on equity, HORMEL FOODS CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: HRL
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.