It’s been a good week for Hormel Foods Corporation (NYSE:HRL) shareholders, because the company has just released its latest full-year results, and the shares gained 5.1% to US$44.88. It was a credible result overall, with revenues of US$9.5b and earnings per share of US$1.80 both in line with analyst estimates, showing that Hormel Foods is executing in line with expectations. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. We thought readers would find it interesting to see analysts’ latest post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from Hormel Foods’s eleven analysts is for revenues of US$9.71b in 2020, which would reflect a reasonable 2.2% increase on its sales over the past 12 months. Earnings per share are forecast to shrink 3.7% to US$1.76 in the same period. Before this earnings report, analysts had been forecasting revenues of US$9.70b and earnings per share (EPS) of US$1.77 in 2020. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.
Analysts reconfirmed their price target of US$40.71, showing that the business is executing well and in line with expectations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Hormel Foods, with the most bullish analyst valuing it at US$48.00 and the most bearish at US$34.50 per share. This shows there is still quite a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Analysts are definitely expecting Hormel Foods’s growth to accelerate, with the forecast 2.2% growth ranking favourably alongside historical growth of 0.4% per annum over the past five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 2.9% next year. So it’s clear that despite the acceleration in growth, Hormel Foods is expected to grow meaningfully slower than the market average.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Hormel Foods’s revenues are expected to perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for Hormel Foods going out to 2022, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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