No Surprises in Narrow-Moat Hormel’s First-Quarter Report; Shares Modestly Overvalued
We do not anticipate a material change to our $36 valuation after Hormel reported first-quarter earnings largely in line with our expectations. Two salmonella-related recalls on Jennie-O lean ground turkey resulted in a 10% drop in volumes for that product, but we are encouraged that conditions in the overall turkey market are improving. After two years of oversupply driving low-single-digit price declines, segment prices and profits were flat in the quarter, despite the recalls. Furthermore, th...Hormel Foods is primarily engaged in the production of meat and food products and the marketing of those products throughout the United States and internationally. The company's segments are: Grocery Products, which consists of the processing, marketing, and sale of shelf-stable food products; Refrigerated Foods, which consists of the processing, marketing, and sale of branded and unbranded pork, beef, chicken, and turkey products; Jennie-O Turkey Store, which consists of the processing, marketing, and sale of branded and unbranded turkey products; and International and Other, which includes Hormel Foods International Corporation that manufactures, markets, and sells the company's products internationally.
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