NEW YORK (TheStreet) -- Shares of Hormel Foods Corp. (HRL) are higher by 3.43% to $58.55 in after-hours trading on Tuesday, after the marketer and seller of a variety of meat and packaged foods announced it has agreed to acquire Applegate Farms LLC for approximately $775 million.
The acquisition allows the maker of Spam a secure position in the organic meats category, The Wall Street Journal reports.
"A growing number of consumers are choosing natural and organic products. This deal allows us to expand the breadth of our protein offerings to provide consumers more choice," company CEO Jeffrey Ettinger said in a statement announcing the deal.
Applegate will operate autonomously as a standalone subsidiary of Hormel's refrigerated foods unit. Hormel is expecting the acquisition to be neutral to its 2015 earnings but accretive by approximately 7 cents to 8 cents per share in fiscal 2016.
Hormel said the deal is expected to close within 60 days.
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 revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels and good cash flow from operations. 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:
- The revenue growth came in higher than the industry average of 10.9%. Since the same quarter one year prior, revenues slightly increased by 1.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- HRL's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash 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, HORMEL FOODS CORP's return on equity exceeds that of both the industry average and the S&P 500.
- 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- You can view the full analysis from the report here: HRL Ratings Report