Hormel (HRL) Set to Report Q3 Earnings: What to Expect?

Hormel Foods Corporation HRL is scheduled to report fiscal third-quarter 2015 results before the opening bell on Aug 19, 2015. In the last four trailing quarters, the company has reported a positive average earnings surprise of 5.14%, although it missed the estimates on one occasion. Let’s see how things are shaping up prior to this announcement.

Factors to Influence Q3 Results

Hormel Foods believes that increased demand of foodservice & retail value-added products as well as lower pork costs would boost revenue and margin growth in its Refrigerated Foods and Grocery Products segments. Also, management remains confident that its CytoSport business would sustain margin growth in the Specialty Foods segment for the third quarter.

Hormel Foods believes that its non-imitable, value-added and innovative solutions would strengthen its financial fundamentals in fiscal third quarter.  Further, the company’s Make The Switch promotional campaign, effective from the beginning of current fiscal year, will likely stimulate demand for its Jennie-O Turkey Store products across newer markets in the U.S.

However, benefits reaped from the above-mentioned positives might be offset by persistent difficulties in the meat industry. An outbreak of Avian flu continues to pose severe problems for meat producers who are largely dependent on the chicken segment for revenues. Further, the H5N2 influenza was lately detected in many turkey-supplying farms of Hormel Foods’ Jennie-O Turkey Store division. Such unfortunate developments might lower the supply of turkey and hence, adversely affect the company’s segmental sales in the near term.

Notably, extensive industry rivalry can also impact Hormel Foods’ results for fiscal third-quarter 2015.

Taking into account the current business situation, the company expects adjusted earnings to scale the lower end of its previously stated guidance range of $2.50–$2.60 per share for fiscal 2015.  

Earnings Whispers

Our proven model does not conclusively show that Hormel Foods is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for an earnings beat. That is not the case here as we will see below.

Zacks ESP: The stock’s Earnings ESP is 0.00%, as the Most Accurate estimate stands in line with the Zacks Consensus Estimate of 55 cents.

Zacks Rank: Hormel Foods’ Zacks Rank #4 (Sell), when combined with a 0.00% ESP, makes surprise predictions difficult.

We caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Stocks to Consider

Here are some companies you may want to consider, as our model shows these have the right combination of elements to post an earnings beat:

Campbell Soup Company CPB, with an Earnings ESP of +4.76% and a Zacks Rank #2.

Supervalu Inc. SVU, with an Earnings ESP of +14.29% and a Zacks Rank #2.

The J. M. Smucker Company SJM, with an Earnings ESP of +4.10% and a Zacks Rank #3.

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SUPERVALU INC (SVU): Free Stock Analysis Report
 
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HORMEL FOODS CP (HRL): Free Stock Analysis Report
 
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