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Hormel Foods (HRL) Opens New Production Unit to Boost Capacity

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Zacks Equity Research
·3 min read
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Hormel Foods Corporation HRL is on track with strategic investments for boosting capacity. Keeping along these lines, the company announced the opening of a new manufacturing plant — Papillion Foods — situated in Papillion, NE. The new 535,000-square feet facility will manufacture salami and dry sausage items under the Columbus Craft Meats and Hormel brands.

Notably, the new production facility is a state-of-the-art food processing unit that includes latest sustainability processes like automated guided vehicles to transfer products across the plant. The unit also includes automatic rack assists to lift objects and LED lighting with motion sensors. Apart from this,the newly-opened plant will provide a number of job opportunities to people in the local community. Clearly, the Papillion Foods plant will provide additional capacity to the company and boost growth.

Other Expansion & Innovation Efforts

Hormel Foods’ focus on making continued investments to enhance capacity through expansions is a major driver. Recently, the company carried out the Burke pizza toppings plant expansion. Moreover, its facility expansion in Nevada, Iowa will be operational during the first quarter of fiscal 2021, providing the company additional capacity for pizza toppings. Also, management is focused on expanding the capacity of its pepperoni business. Notably, the company expects to incur capital expenditures of $350 million for fiscal 2021.

Additionally, Hormel Foods is strengthening its business on the back of strategic acquisitions. In this regard, the company acquired a Texas-based pit-smoked meats company, Sadler's Smokehouse (completed on Mar 2, 2020). The buyout is in sync with Hormel Foods’ initiatives to bolster position in the foodservice category. Further, the Columbus (completed on Nov 27, 2017) and Fontanini (completed on Aug 17, 2017) buyouts have been aiding performance. Also, the Ceratti acquisition (completed on Aug 24, 2017) is aiding the International segment. These buyouts are expected to continue boosting performance in the forthcoming periods.

Apart from these, Hormel Foods’ focus on innovation is yielding. During fiscal fourth-quarter earnings call, management highlighted that the company achieved its goal of generating 15% of sales from new products that were rolled out in the last five years. Even amid the coronavirus outbreak, Hormel Foods developed, launched and generated sales from new items. Well, the company has been making strategic advertisement investments to support growth of its brands. Also, it focuses on launching products to meet consumers’ preferences.

Notably, shares of this Zacks Rank #3 (Hold) company have gained 4.2% year to date against the industry’s decline of 12.3%.

Better-Ranked Food Stocks

The Hain Celestial HAIN, with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 24.6%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

B&G Foods, Inc. BGS, with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 9.3%, on average.

Sysco Corporation SYY, with a Zacks Rank #2, has a long-term earnings growth rate of 11%.

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