KeyBanc analyst Akshay Jagdale on Wednesday recommended that investors buy Hormel Food Corp.'s stock after its recent drop.
THE BACKGROUND: Hormel shares fell 3.6 percent Tuesday after the Austin, Minn., company trimmed its profit expectations for the year by 3 percent, to a level below what analysts had predicted. The maker of Spam, Skippy peanut butter, Jennie-O Turkey Store and other products cited some higher costs, softer sales and worse-than-expected performance from its pork operations for the cut outlook.
THE OPINION: The guidance cut seems "conservative," Jagdale said — the company could just be cautious with its forecasts. He remains positive on Hormel's growth initiatives for refrigerated foods and also said that buying Skippy should help Hormel increase its sales from its more profitable branded products.
Hormel agreed to buy Skippy for $700 million in January.
Jagdale has a "Buy" rating and a $48 price target on Hormel shares.
THE STOCK: Shares of Hormel fell 15 cents to $39.04 by late afternoon Wednesday as broader markets also slipped. Hormel stock has gained 25 percent in 2013.