Hormel Foods Shares Pop 7.4% on Solid Q2 Beat, Raised Top-line Guidance

Hormel Foods Corp. (HRL) reported stronger-than-expected Q2 results. EPS of $0.42 beat the consensus estimate of $0.41. Shares of the leading global branded food company were up 7.4% at the close of trade on Thursday.

Total revenues grew 8% year-over-year to $2.6 billion, versus the consensus estimate of $2.42 billion. The growth was driven by an upsurge in demand across retail, deli, and international segments, robust foodservice sales, as well as enhancements in the supply chain results.

Notably, the U.S. foodservice and U.S. deli net sales grew 28% and 4%, respectively, while international net sales rose 11% year-over-year. (See HRL stock analysis on TipRanks)

Management raised its top-line FY2021 guidance and now expects revenues to range between $10.2 – $10.8 billion versus analysts’ estimate of $10.15 billion. Moreover, it reaffirmed its EPS target of $1.70 – $1.82, versus the consensus of $1.74. Notably, the guidance excludes the impact of Planters business acquisition announced in February and expected to close in June this year.

Hormel Foods CEO Jim Snee commented, “We have a very positive outlook on the foodservice industry and continue to see elevated demand in the retail, deli and international channels. As we enter this inflationary period, we will continue to offset margin pressure with price actions and supply chain improvements.”

He further added, “Our experienced management team has a proven ability to navigate and grow our business in volatile market conditions.”

Following the results announcement, Oppenheimer analyst Rupesh Parikh reiterated a Hold rating on the stock but did not assign any price target.

Parikh said, “We believe the market will look favourably upon the report and reaffirmation of guidance. Our Perform rating reflects valuation and prospects for muted EPS growth.”

Overall, the stock has a Moderate Buy consensus rating based on 1 Buy and 1 Hold. The average analyst price target of $44 implies 11% downside potential from current levels.

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