Hormel Foods Corporation (HRL), the food and meat products manufacturer which owns well-known consumer brands such as Jennie-O, SPAM, Hormel, and Dinty Moore, on Aug 20 beat the Zacks Consensus Estimate in the third quarter by 9.62% as consumers continue to eat more meals at home.

Earnings per share were 57 cents compared to the Zacks Consensus Estimate of 52 cents and were 50% higher than EPS in the second quarter of a year ago.

Sales and volumes both decreased, however. Sales declined 6% to $1.57 billion.

The company continues to see strong sales of SPAM, HORMEL chili and HERDEZ products as consumers eat at home and seek out value in doing so. Sales of microwavable products were soft, however.

Hormel Re-Affirmed 2009 Guidance

The company was boosted by its strong third quarter results and re-affirmed its full year guidance of $2.36 to $2.42 per share.

Analysts scrambled to raise estimates to be in line with the company’s guidance. 6 out of 8 analysts raised for the fourth quarter as the Zacks Consensus Estimate rose 3 cents to 68 cents in the last month.

The full-year Zacks Consensus Estimate jumped 6.1% to $2.43, which is a penny above the company’s forecast range.

Value Fundamentals

Hormel is much more expensive than when I last reviewed it on Apr 29. It was trading as 12x forward earnings and is now trading at 15.1x forward earnings. It’s on the cusp of being too expensive to be a value stock.

Its price-to-book ratio is firmly in the value camp, however, at 2.27. The company also has a solid 1-year return on equity (ROE) of 14.73%. It is a Zacks #2 Rank (buy) stock.

Hormel also continues to pay a dividend, having rewarded shareholders an impressive 324 consecutive quarters. The stock has a yield of 2.10%.

Zacks Investment Research
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