Can Hormel Foods' Brand Strength Counter Pork Market Woes?


Zacks Equity Research

January 10, 2019


Rising freight costs as well as volatilities in trade and commodity markets have spoiled the broth for most food companies in the United States, including Hormel Foods Corporation (HRL - Free Report) . Despite these downsides, the company managed to survive on the back of strong brands and is gaining from steady growth in the Refrigerated Foods and International categories. Notably, the Zacks Rank #3 (Hold) stock has gained 14.7% in the past three months, against the industry’s decline of 2.9%. Let’s delve deeper.


Portfolio Adorned by Strong Brands


Hormel Foods’ portfolio consists of robust brands that are fueling its popularity and boosting growth. Stronger demand for brands like Hormel Black Label bacon, SPAM, Muscle Milk and Wholly Guacamole dips are expected to drive revenues in the upcoming quarters. Moreover, the company believes that increasing popularity of other brands like The Natural Choice, Cafe H products and Hormel fire braised meats will fuel performance.


The company is also committed toward making strategic advertisement investments to support growth of brands. Additionally, the company focuses on launching products to meet consumers’ preferences aptly.


Acquisitions are other lucrative mechanism through which the company is strengthening its brand. To this end, buyouts of Columbus, Fontanini and Ceratti are yielding and expected to continue boosting performance in the forthcoming periods.


Additionally, strong brands and effective strategies are aiding growth in the Refrigerated Foods and International categories. These segments witnessed year-on-year growth of 5.7% and 7.3% during the fourth quarter of fiscal 2018, respectively.  Prior to this, these segments registered respective increases of 10.1% and 11.1% in the third quarter, 13.6% and 22.1% in the second quarter as well as 4.8% and 19.5% in the first quarter.


Market Volatilities Raise Worries ...


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