Hormel Foods (HRL) Gains on Strategic Priorities & Foodservice
Hormel Foods Corporation HRL has been reaping benefits from the growing demand for Foodservice products. The company is focused on its six strategic priorities to drive growth. The leading food company is strengthening its business on the back of strategic acquisitions. Yet, the HRL is not immune to rising costs.
Let’s delve deeper.
Foodservice Fuels Growth
Hormel Foods’ long-standing relationships, differentiated product portfolio, innovative solutions and impressive sales team are fueling growth in the Foodservice business. These trends continued in the first quarter of fiscal 2024, with net sales in the Foodservice segment increasing 9.4% and volumes rising 8% on broad-based growth in several categories. Management continues to see volume growth, led by turkey, bacon and pepperoni. This, along with increased raw material input markets, is likely to support net sales growth in the segment.
Image Source: Zacks Investment Research
Strategic Priorities: Key Driver
Hormel Foods is progressing well with its six strategic priorities, which include enhancing focus and fueling growth in the Retail unit, reinforcing leadership in Foodservice, pursuing solid global expansion, implementing the enterprise entertaining & snacking vision, emphasizing the One Supply Chain initiative and continuing the ongoing transformation and modernization of the business.
With regard to transformation and modernization initiatives, it is focused on supply chain efficiency, portfolio optimization and data and analytics. In the plan work stream, management is implementing a new end-to-end planning process and is integrating new planning technology. Under the buy work stream, the company is realizing the benefits of new procurement and productivity programs. Its focus on such initiatives is vital to projected growth in the coming three years. In addition, Hormel Foods’ One Supply Chain initiative is aimed at reducing costs and complexity while investing in long-term growth.
With regard to expansions, Hormel Foods acquired a minority stake in Indonesia-based food and beverage company PT Garudafood Putra Putri Jaya Tbk in the fourth quarter of fiscal 2022. The move helps Hormel Foods expand its presence in Indonesia and Southeast Asia. On Jun 7, 2021, the company acquired the Planters snacking portfolio from The Kraft Heinz Company. In the first quarter of fiscal 2024, Planters' volume and dollar share maintained favorable momentum with total points of distribution and household penetration growth.
Is All Rosy for Hormel Foods?
Hormel Foods has been battling the adverse impact of rising selling, general and administrative (SG&A) expenses. In the first quarter of fiscal 2024, SG&A expenses increased 8%, thanks to additional investments in transformation and modernization efforts coupled with increased employee-related costs. Management expects to witness a major increase in advertising investments in the fiscal second quarter and the fiscal 2024 as it continues to support various brands. Hormel Foods has been battling weakness in the International segment. In the fiscal first, segmental net sales fell 3.3% on reduced branded export sales and soft sales in China.
The upsides mentioned above are likely to keep Hormel Foods’ growth story going. Shares of the Zacks Rank #3 (Hold) company have increased 5.2% year to date compared with the industry’s 3.7% growth.
Solid Food Stocks
Post Holdings POST, which operates as a consumer packaged goods holding company, sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 52.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and earnings suggests growth of 15.2% and 3.4%, respectively, from the year-ago reported numbers.
Vital Farms Inc. VITL offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2 (Buy). VITL has a trailing four-quarter average earnings surprise of 145%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales indicates growth of 29% from the year-ago reported actuals.
Utz Brands Inc. UTZ manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ’s has a trailing four-quarter earnings surprise of 2.6%, on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year sales and earnings suggests growth of 0.9% and 19.3%, respectively, from the year-ago reported numbers.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Hormel Foods Corporation (HRL) : Free Stock Analysis Report
Post Holdings, Inc. (POST) : Free Stock Analysis Report
Vital Farms, Inc. (VITL) : Free Stock Analysis Report
Utz Brands, Inc. (UTZ) : Free Stock Analysis Report
