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Supply-Chain Issues May Hurt Hormel’s 4Q Production, CEO Says

support@smarteranalyst.com (Ben Mahaney)
·2 min read

Hormel Foods warned that continued supply-chain issues might hurt production in 4Q. The stock fell about 2.1% on Tuesday.

Hormel Foods’ (HRL) CEO Jim Snee said, “In the fourth quarter, we expect factors such as limited labor availability, production inefficiencies due to COVID-19 safety measures and unseasonably low levels of inventory to challenge our ability to meet the increased demand for certain products." The refrigerated packaged food retailer is looking for alternative solutions to increase production, including relying on co-manufacturing partners.

In 3Q, Hormel Foods saw revenues increase 3.9% to $2.38 billion year-on-year, surpassing analysts’ expectations of $2.37 billion. The company’s earnings of $0.37 remained flat on a year-over-year basis and beat Street estimates of $0.34. (See HRL stock analysis on TipRanks).

Oppenheimer analyst Rupesh Parikh said "Strength in grocery helped to offset challenges related to foodservice in the refrigerated food and Jennie-O segments. Management commentary suggests similar dynamics are likely to play out in Q4." However, Parikh remained sidelined on the stock with a Hold rating citing valuation.

Currently, HRL has a Moderate Buy analyst consensus. Given the year-to-date stock price gain of about 14.3%, the average price target of $56 implies upside potential of about 8.7% from current levels.

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