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Why is Hormel Foods (HRL) a Strong Buy Stock Now?

Hormel Foods HRL is a multinational manufacturer and marketer of consumer-branded meat and food products, many of which are among the best known and trusted in the food industry.  The company’s products include stews, chilies, meat spreads, frozen processed foods, and more.  Hormel sells products under several brands, which include Chi-Chi’s, Dinty Moore, Jennie-O, Muscle Milk, Skippy, and Spam.

The meat producing industry is in the top 6% of all industries covered by Zacks, so Hormel is in good company right now.  The $20 billion dollar company has a beta of just 0.62, so expect less volatility when investing in HRL stock.  It’s worth noting that the company doles out a 1.54% dividend to shareholders.

So what makes Hormel worth buying right now?  For one, the company has some great growth metrics backing it up.  The company has a net margin of 8.18%, which is well ahead of the industry’s average net margin of 6.87%.  Its earnings are projected to grow by 18.69% this year, and sales are expected to increase by 4.12%.

Earnings Estimate Revisions

While these metrics are great, it doesn’t explain why the stock is a Zacks Rank #1 (Strong Buy).  Hormel has obtained this great rank for a number of reasons.  First, the company has received two earnings estimate revisions by analysts over the last 60 days for this quarter.  Both of those revisions were made in the upwards direction, so no negative revisions were posted by analysts. 

EPS Consensus Movement

Hormel has also seen its rank improve because of the positive trends seen across our EPS consensus estimates.  90 days ago, our EPS consensus estimated earnings of $0.35 for this quarter.  Since then, our consensus has been revised, and now estimates earnings of $0.38 per share.  Our EPS consensus for this year has been trending upwards over the last 90 days as well, going from an estimate of $1.46 to $1.57. 

Surprise History

Hormel is also a Strong Buy because of its strong earnings history.  It has consistently beaten our EPS consensus estimate in each of the last four quarters.  Last quarter, the food producer beat our EPS consensus by 16.22%. 

Likely to Top Earnings Expectations

One important metric to note is the positive ESP (Expected Surprise Prediction) of 5.26%.  When a stock has a Zacks Rank #3 (Hold) or better as well as a positive ESP, it ends up beating our EPS consensus estimate over 70% of the time.  Hormel is expected to report its earnings in mid-May.  Buying the stock before earnings are released could yield significant profits for you over the short term.

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HORMEL FOODS CP (HRL): Free Stock Analysis Report
 
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