Barbarian At The Gate: Hillshire Brands (HSH)

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 "barbarian at the gate" (strong stocks crossing above resistance 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 $112.7 million.
  • HSH has traded 3.2 million shares today.
  • HSH traded in a range 255.5% of the normal price range with a price range of $1.80.
  • HSH traded above its daily resistance level (quality: 4 days, meaning that the stock is crossing a resistance level set by the last 4 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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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. The stock currently has a dividend yield of 1.9%. HSH has a PE ratio of 20.8. Currently there are 3 analysts that rate Hillshire Brands a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Hillshire Brands has been 954,900 shares per day over the past 30 days. Hillshire has a market cap of $4.5 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.66 and a short float of 1.2% with 0.49 days to cover. Shares are up 6.9% year-to-date as of the close of trading on Monday.

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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 revenue growth, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • HSH's revenue growth has slightly outpaced the industry average of 2.6%. Since the same quarter one year prior, revenues slightly increased by 3.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Food Products industry and the overall market, HILLSHIRE BRANDS CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • HILLSHIRE BRANDS CO reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. 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 ($1.72 versus $1.49).
  • 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 54.8% when compared to the same quarter one year ago, falling from $93.00 million to $42.00 million.
  • Currently the debt-to-equity ratio of 1.57 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, HSH maintains a poor quick ratio of 0.81, which illustrates the inability to avoid short-term cash problems.

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