Hormel proves superior to Heinz after takeovers
Hormel Foods Inc., the maker of the iconic Spam canned meat used to feed Allied troops during World War II, produced the best return after takeovers among peers over the past decade by adding products such as Don Miguel burritos and preservative-free luncheon meats.
Hormel gained 11 percent when adjusting for volatility, the best among 14 companies with sales of at least $2 billion in meat, dairy, frozen, canned and perishable foods, a Bloomberg analysis shows.
The 121-year-old company, founded by the son of German immigrants in an abandoned creamery near Austin, Minn., had the highest total returns and the fifth-lowest volatility, beating second-ranked H.J. Heinz Co. of Pittsburgh and General Mills Inc., which came in third.
Hormel has made 14 acquisitions over the past decade, adding Mexican cuisine and packaged foods to its product range. That expansion has helped to mitigate the company's earnings volatility caused by commodity foods such as pork and poultry, which are vulnerable to jumps in feed costs.
“They have a well-balanced portfolio,” said Farha Aslam, a New York analyst for Stephens Inc. who has a hold rating on the shares. “The company emphasizes profits over its volume. That's what gets you returns.”
Net income over the past five years grew by an average of 11 percent annually as sales expanded 6.7 percent. Profit rose by an average of 3.3 percent at Heinz and 6.5 percent at General Mills over the same period. Hormel is the only company among the peer group with no net debt.
“Hormel Foods has established a steady record of rising earnings,” said Ken Shea, a Bloomberg Industries senior analyst.
While the company has a wide range of products, it focuses on investing in higher-margin items, Aslam said.
Hormel returned 221 percent for shareholders in the 10 years through September, compared with H.J. Heinz's 165 percent, General Mills's 137 percent, and Campbell Soup's 108 percent. Hormel had the lowest volatility after those three companies and Conagra Foods Inc., the maker of Orville Redenbacher's popcorn and Banquet frozen meals.
Hormel's last two acquisitions were Wholly Guacamole producer Fresherized Foods last year and Mexican-food supplier Don Miguel Foods Corp. in 2010. The price for each deal was not disclosed. Both businesses are part of MegaMex Foods LLC, a joint venture between Hormel and Mexico's Herdez Del Fuerte SA de CV.
Don Miguel makes fresh and frozen tacos, empanadas and burritos. Its addition helped sales in Hormel's grocery-product segment rise 21 percent in the three months through July from a year earlier, the company said Aug. 23.
Hormel also has gained from the growing popularity of turkey meat and its preservative-free line of Natural Choice luncheon meats among health-conscious U.S. consumers. The luncheon meats are placed in a cylinder-shaped chamber that uses up to 87,000 pounds per square inch of water pressure — five to six times that of the deepest ocean — to protect the foods against bacteria.
The company even boosted sales of its Spam brand domestically and in overseas markets such as South Korea. The 75-year-old pork product is now being offered in more than a dozen varieties, including with black pepper, cheese, bacon or hot and spicy.
“An important factor on Hormel's future growth will be how they invest cash,” Aslam said. “They have tremendous firepower.”
Rick Williamson, a Hormel spokesman, declined to comment.
Hormel seeks to increase sales by 5 percent a year and per-share profit by 10 percent, Chairman and Chief Executive Officer Jeffrey M. Ettinger said in a Sept. 6 conference call with analysts.
The company plans do that by raising turkeys, processing pork into Spam, producing its Compleats line of microwaveable meals and selling sealed trays of meats and cheeses, a product delis made for years that Hormel started to mass-market in 2000.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Pirates trade for Mariners’ Happ
- Armstrong escapee caught; murder charges pending
- Heyl: Longtime disc jockey Jimmy Roach to turn dismissal into brighter times
- Pirates’ Burnett endures another poor start in blowout loss to Reds
- Inside the Steelers: Rookie linebacker Chickillo continues to excel
- Experimental Ebola vaccine could stop virus in West Africa
- Steelers’ reserve quarterbacks vie to secure spot behind Roethlisberger, Gradkowski
- Pirates bolster bullpen by trading for former closer Soria
- Judge rules McCullough guilty of taking money from elderly woman’s estate
- Steelers stress improved conditioning in attempt to play past injuries
- Pitt, McConnell-Serio agree to new contract through 2020-21 season