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Hormel Foods Corporation (NYSE:HRL): Will The Growth Last?

After Hormel Foods Corporation’s (NYSE:HRL) earnings announcement in July 2018, analyst forecasts seem fairly subdued, with earnings expected to grow by 4.8% in the upcoming year against the higher past 5-year average growth rate of 13%. Currently with trailing-twelve-month earnings of US$847m, we can expect this to reach US$888m by 2019. Below is a brief commentary around Hormel Foods’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for Hormel Foods

How is Hormel Foods going to perform in the near future?

The 10 analysts covering HRL view its longer term outlook with a positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for HRL, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

NYSE:HRL Future Profit November 20th 18
NYSE:HRL Future Profit November 20th 18

By 2021, HRL’s earnings should reach US$934m, from current levels of US$847m, resulting in an annual growth rate of 2.3%. This leads to an EPS of $1.98 in the final year of projections relative to the current EPS of $1.6. Earnings growth appears to be a result of top-line expansion of 2.9%, dropping down to the bottome-line. By the end of 2021, analysts are expecting earnings to outpace revenue, and margins to expand from the current 9.2% to 9.3%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Hormel Foods, I’ve put together three pertinent aspects you should look at:

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  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

  2. Valuation: What is Hormel Foods worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Hormel Foods is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Hormel Foods? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.