Hormel Foods Corp. HRL is using pricing as one of several levers to improve profitability while adapting its portfolio to consumers who are becoming increasingly deliberate about value. Management has executed two rounds of Retail pricing, which contributed to the expected elasticity-related contraction in volume. Total Hormel dollar consumption declined 1% during the fiscal third quarter. At the same time, priority businesses such as Jennie-O ground turkey and Hormel entrées delivered mid- to high-single-digit consumption growth.
The company is pursuing several initiatives to improve bottom-line performance alongside continued momentum in parts of the business. Pricing remains an important lever, with management highlighting the successful execution of two pricing rounds. The team is also focused on improving mix, generating efficiency gains and taking significant SG&A actions. Together, these initiatives represent a broader approach to improving profitability through pricing, mix, efficiency and cost discipline. In the fiscal third quarter, adjusted operating margin reached 9%, up 60 basis points year over year, while adjusted earnings per share rose 6% to 37 cents.
However, Hormel Foods recognizes that consumers are becoming increasingly deliberate in their purchasing choices, with greater emphasis on value. In response, the company is adapting its portfolio to changing consumer behavior. This involves adjusting its product offerings, messaging, retail positioning, pack formats and pricing to better reflect evolving consumer needs. These efforts are intended to keep the portfolio aligned with consumers' growing focus on value.
Overall, Hormel Foods is pursuing a broader profitability strategy that combines pricing with mix improvements, efficiency gains and SG&A actions. At the same time, cost discipline and portfolio changes remain central to the company's efforts to improve profitability and support long-term growth.
The Zacks Rundown for HRL
The company’s shares have lost 24.1% in the past three months compared with the industry’s 17.8% decline.
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From a valuation standpoint, HRL trades at a forward price-to-earnings ratio of 12.99, slightly higher than the industry’s average of 12.76. HRL currently carries a Zacks Rank #3 (Hold).
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The Zacks Consensus Estimate for HRL’s current and next fiscal year earnings implies a year-over-year increase of 8.8% and 3.6%, respectively.
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Stocks to Consider
Some better-ranked stocks have been discussed below:
The Chef’s Warehouse, Inc. CHEF distributes specialty food and center-of-the-plate products in the United States, the Middle East, and Canada. CHEF currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for CHEF’s current fiscal-year sales and earnings indicates growth of 10.6% and 33.7%, respectively, from the year-ago reported figures. CHEF delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Medifast, Inc. MED operates as a health and wellness company that provides habit-based and coach-guided lifestyle solutions to address obesity and support a healthy life in the United States. MED currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for MED's current fiscal-year sales and earnings implies a decline of 27.3% and 26.8%, respectively, from the year-ago actuals. MED delivered a trailing four-quarter negative earnings surprise of 462.2%, on average.
Utz Brands, Inc. UTZ, together with its subsidiaries, markets, sells and distributes fresh, frozen, and dry food and non-food products to foodservice customers in the United States. UTZ currently carries a Zacks Rank 2.
The Zacks Consensus Estimate for UTZ’s current fiscal-year sales implies growth of 3.7%, and the same for earnings implies a decline of 2.4% from the year-ago actuals. UTZ delivered a trailing four-quarter earnings surprise of 1.8%, on average.
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Hormel Foods Corporation (HRL): Free Stock Analysis Report
The Chefs' Warehouse, Inc. (CHEF): Free Stock Analysis Report
MEDIFAST INC (MED): Free Stock Analysis Report
Utz Brands, Inc. (UTZ): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).