Last week, you might have seen that Hormel Foods Corporation (NYSE:HRL) released its quarterly result to the market. The early response was not positive, with shares down 7.8% to US$44.77 in the past week. Hormel Foods reported in line with analyst predictions, delivering revenues of US$2.4b and statutory earnings per share of US$0.45, suggesting the business is executing well and in line with its plan. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
After the latest results, the eleven analysts covering Hormel Foods are now predicting revenues of US$9.73b in 2020. If met, this would reflect a reasonable 2.2% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to dip 4.9% to US$1.74 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$9.70b and earnings per share (EPS) of US$1.78 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
Analysts reconfirmed their price target of US$41.63, showing that the business is executing well and in line with expectations. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Hormel Foods at US$51.00 per share, while the most bearish prices it at US$33.50. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
In addition, we can look to Hormel Foods's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's clear from the latest estimates that Hormel Foods's rate of growth is expected to accelerate meaningfully, with forecast 2.2% revenue growth noticeably faster than its historical growth of 0.4%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 2.7% next year. It seems obvious that, while the future growth outlook is brighter than the recent past, analysts also expect Hormel Foods to grow slower than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$41.63, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Hormel Foods analysts - going out to 2022, and you can see them free on our platform here.
We also provide an overview of the Hormel Foods Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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