Hormel Foods is
an international manufacturer and marketer of consumer branded meat and food
products which are sold fresh, frozen, cured, smoked, cooked and canned
(Hormel, Always Tender, Cure 81, SPAM, Dinty Moore, Jennie-O, Mary Kitchen,
Little Sizzlers, Chi-Chi’s, Skippy and Kid’s Kitchen). HRL
has grown profits and dividends at an 11-12% annual rate for the past 10 years
earning a 15% return on equity. Despite
rising feed costs, the company should continue to grow as a result of:
(1) diversified
product portfolio,
(2) aggressive
new advertising campaign,
(3)
acquisitions, especially in the high margin ethnic food category,
(4)
aggressive cost reductions.
Negatives:
(1) highly
competitive industry,
(2) its cost of
goods sold are largely commodities; therefore, volatile prices can impact
margins,
(3) its
international exposure subjects it to currency fluctuations and foreign
regulations.
Hormel is rated
A by Value Line, has a 7% debt to equity ratio and its stock yields
approximately 1.8%.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2004
Ind Ave 2.4 8 36 NA
Debt/ EPS Down Net Value Line
Equity ROE Since 2004 Margin Rating
Ind Ave 37 13 NA 7 NA
Chart
Note: HRL stock made great progress off its
December 2008 low, quickly surpassing the downtrend off its April 2008 high
(straight red line) and the November 2008 trading high (green line). Long term, the stock is in an uptrend (blue
lines). Intermediate term, it is in an
uptrend (purple lines). The wiggly red
line is the 200 day moving average. The
Dividend Growth Portfolio owns a 75% position in HRL---it Sold Half in early
2013 and the stock has continued to advance.
The upper boundary of its Buy
Value Range is $22; the lower boundary of its Sell Half Range is $41.
10/14
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