U.S. Markets open in 5 hrs 17 mins

Hormel Foods (HRL) Hit by Jennie-O Turkey Store Challenges

Zacks Equity Research

We issued an updated research report on premium meat products company, Hormel Foods Corporation HRL on Aug 14.

Inside Story

Hormel Foods’ top- and bottom-line results in second-quarter fiscal 2017 (ended Apr 30, 2017) were largely hurt due to challenges faced by the Jennie-O Turkey Store business segment. Fall in turkey prices, extensive competition and elevation in overall operating expenses have been weighing over this segment's results.

Hormel Foods noted that turkey prices (especially turkey breast meat) went down during the fiscal second quarter. The turkey market has been facing an oversupply situation and is unlikely to witness any price hike in the upcoming quarters.

On the other hand, operating cost of the Jennie-O Turkey Store segment has been escalating due to poor yield accrued from certain plant operations and maintenance required for certain bio-security measures.

In addition, Hormel Foods conducts its business in a highly competitive market. Pilgrim's Pride Corporation PPC, Tyson Foods, Inc. TSN and Sanderson Farms, Inc. SAFM are some major business players of the industry. Intense competition has been putting price pressure on Jennie-O Turkey Store business’ food service, retail, as well as daily business chains.

Hormel Foods expects the aforementioned headwinds to depress its overall fiscal 2017 performance. Notably, the company currently estimates to report earnings at the lower end of the $1.65–$1.71 per share range for fiscal 2017.

Furthermore, we believe that a stronger U.S. dollar might dent Hormel Foods’ international revenues and margins, moving ahead. Moreover, prices of various raw materials used by the company, such as beef, pork and poultry, are exposed to market fluctuations due to supply-demand inconsistencies.

Additionally, outbreak of livestock diseases is expected to give rise to sudden supply-chain challenges for the company in the near term.

Zacks' 10-Minute Stock-Picking Secret

Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.

But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.

Learn the secret >>

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
Tyson Foods, Inc. (TSN) : Free Stock Analysis Report
Hormel Foods Corporation (HRL) : Free Stock Analysis Report
Sanderson Farms, Inc. (SAFM) : Free Stock Analysis Report
Pilgrim's Pride Corporation (PPC) : Free Stock Analysis Report
To read this article on Zacks.com click here.