Medium Term Catalyst: Q1 Numbers due mid Feb (tba)
Entry: Between $36.25-34.50
Shorter Term Target: $38.07 + 5% from entry
Medium Term Target: $39.94 + 10% from entry Average Volume (50-day): 2.8 million
Longer Term Target: $43.75 + 20% from entry Beta: 0.48/ Forward P/E: 20.66x
Risk Management: Stop if price closes below $33.22, this could indicate a trend change
- The share has been pushing higher since early December (chart above), and recent weeks has seen a compelling series of higher lows (in conjunction with bullish engulfing candles), with the probability of a further break above current levels in the short term. The MACD is also nearing a cross to the upside, with the RSI also trending higher from its late November lows
- From a standalone basis HRL trades at a 4% discount to its five year average when viewed on a Price/ Earnings basis. Applying this discount to the current share price would imply an upside target of $37.60. HRL also benefits from an Altman Z-Score of 9.38 (a read of >3 generally indicates relatively solid underlying company financials)
- On a Peer perspective Hormel also looks attractive when viewed on a Price/ Earnings basis (discount of more than 30%). The shares current dividend yield is 1.87% on an undemanding payout ratio of 36.2%
- Q4 filings (released November 22nd) were in line with estimates. Outlook for 2017 is positive with management targeting EPS in the range of between $1.68 and $1.74. Tailwinds include better grain prices, and continued low input costs within its refrigerated foods segment. At the time management commented; “We expect the International segment to show growth through increased exports and improved results…”
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