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Hormel Analyst Stays Neutral After Mixed Q4 Print

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Hormel Analyst Stays Neutral After Mixed Q4 Print

Consumer-branded food and meat products company Hormel Foods Corp (NYSE: HRL) reported fourth-quarter results Tuesday that were highlighted by an earnings beat, but BMO Capital Markets is sticking to the sidelines.

Hormel's Q4 

Hormel Foods reported a 1-cent-per-share EPS beat at 47 cents as organic sales growth trends improved from the last quarter. Refrigerated sales, Jennie-O volume and grocery volume were all positive, but were offset by lower international sales, grocery pricing and Jennie-O pricing.

Operating margins fell 60 basis points from last year to 12.8%, although this does mark an expansion of 150 basis points from the prior quarter. 

BMO Sidelined On Hormel 

Exiting Hormel's quarterly report, it is evident the company is positioned to generate above-average long-term growth, BMO Capital Markets analyst Kenneth Zaslow said in a Wednesday note.

This is due to the company's portfolio composition, growth opportunities, balance sheet and leveraging of cutting-edge technologies in its strategic initiatives, the analyst said. 

Yet a bullish stance on the stock can't be justified amid African Swine Fever concerns, an inability to restore the Jennie-O margin structure and competition in key categories like peanut butter, he said. 

BMO maintained a Market Perform rating on Hormel with an unchanged $44 price target.

What's Next For Hormel 

Hormel guided to fiscal 2020 revenue in a range of $9.5 to $10.3 billion and EPS of $1.69 to $1.83.

The math behind the numbers implies organic pre-tax earnings growth of 5% to 7%, which is consistent with management's near-term goal.

Hormel shares were trading 0.16% higher at $44.36 at the time of publication. 

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Hormel Foods To Continue Navigating Rough Waters In Near Term, BMO Says

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Latest Ratings for HRL

DateFirmActionFromTo
Mar 2020BarclaysMaintainsEqual-Weight
Mar 2020Goldman SachsUpgradesSellNeutral
Mar 2020CFRAUpgradesSellHold

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