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Hormel Foods (HRL) to Post Q4 Earnings: What's in Store?

Premium meat products company Hormel Foods Corporation HRL is scheduled to report fourth-quarter fiscal 2017 (ended October, 2017) results on Nov 21, before the market opens.

Over the last four quarters, the company recorded an average negative earnings surprise of 4.28%. Dismal performance of the Jennie-O Turkey Store business segment has been hurting the company’s revenues and profitability for the past several quarters.

However, our proven model shows that Hormel Foods’ earnings will likely beat estimates in the quarter under review. Notably, on a month-to-date basis, Hormel Foods’ shares have yielded a return of 5.7%, outperforming 5.2% growth recorded by the industry.


Why a Likely Positive Surprise?

Hormel Foods has the right combination of the two key ingredients.

Zacks ESP: Hormel Foods has an Earnings ESP of +2.52%, as the Most Accurate estimate of 41 cents comes above the Zacks Consensus Estimate of 40 cents.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Hormel Foods’ favorable Zacks Rank #3 (Hold), when combined with a positive ESP, predicts a likely earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

What’s Driving the Better-Than-Expected Earnings?

Hormel Foods anticipates that elevated demand for its popular branded products, including Hormel Gatherings, Hormel Pepperoni, Hormel Natural Choice, Justin's, Wholly Guacamole, Herdez, Spam and Skippy, will bolster the company’s aggregate revenues, going forward.

The company also believes the strategic acquisition of the Fontanini brand from Capitol Wholesale Meats, Inc (August 2017) and the Ceratti brand from Cidade do Sol (August 2017) will likely drive its top- and bottom-line results in the quarter to be reported.

Notably, the Zacks Consensus Estimates for the Hormel’s Grocery Products, Refrigerated Foods, Jennie-O Turkey Store and Specialty Foods segments are currently pegged at $478 million, $1,102 million, $472 million and $199 million respectively for the fiscal fourth quarter, higher than the corresponding tallies of $422 million, $1,087 million, $369 million and $197 million generated in the preceding quarter.

Nevertheless, Hormel Foods fears that continued inflation in the prices of major inputs such as pork and beef trim or challenges in the Jennie-O Turkey Store business might dent its bottom-line performance. Notably, the company has lowered its fiscal 2017 earnings guidance to $1.54-$1.58 per share from the prior projection of $1.65-$1.71 per share.

However, we believe that the above-mentioned headwinds will likely be offset by robust top-line performance expected in the quarter to be reported.

Other Stocks that Warrant a Look

Here are some stocks within the industry that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

The Estée Lauder Companies Inc. EL currently sports a Zacks Rank of 1 and has an Earnings ESP of +0.23%.

MGP Ingredients, Inc. MGPI holds a Zacks Rank of 2 (Buy) and has an Earnings ESP of +16.00%.

United Natural Foods, Inc. UNFI also carries a Zacks Rank of 2 and has an Earnings ESP of +6.33%.

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