Recently, Hormel Foods Corporation (HRL) reported encouraging results for the first quarter of fiscal 2010. During the quarter, net earnings stood at $111.2 million, up 37% from $81.4 million in the same quarter of fiscal 2009. EPS for the quarter was 82 cents, compared to 60 cents in the year-ago period. It topped market expectations of 68 cents per share.
Thus, the company raised its full year EPS guidance range from $2.63 to $2.73 per share to $2.68 to $2.78.
Agreement
Based on the above, 9 out of 10 analysts revised their 2010 estimates upward in the last 30 days, with none moving in the opposite direction. For fiscal year 2011, 5 out of 8 analysts increased their estimates with only 1 analyst lowering estimate.
Magnitude
In the last 30 days, the Zacks Consensus Estimate for fiscal year 2010 moved up from $2.67 to $2.76.
For fiscal year 2011, the Zacks Consensus Estimate has increased from $2.89 to $2.91.Surprise
With respect to earnings surprises, Hormel's track record in the prior 4 quarters has been positive. It produced an average positive earnings surprise of 15.36% over the last four quarters, meaning that it has beaten the Zacks Consensus Estimate by that measure over the trailing 12 months. Hence, the short-term rating on the stock remains Hold with a Zacks #3 Rank.
Hormel Foods is a leading manufacturer and marketer of various meat and food products. Hormel's plans to increase spending on advertising would help maintain and grow market share in the future.
Although the food market is extremely competitive, a greater share of value-added branded products in Hormel's product-mix will help strengthen its margins and reduce exposure to commodity prices in the long term. Hence, our long-term recommendation on the stock remains Neutral.
Earnings Scorecard: Hormel