Hormel Foods (HRL) to Report Q1 Earnings: What to Expect?

Hormel Foods Corporation HRL is scheduled to report fiscal first-quarter 2016 results before the opening bell on Feb 16, 2016. In the last four quarters, the company has reported a positive average earnings surprise of 6.19%. Let’s see how things are shaping up prior to this announcement.

Factors to Influence Q1 Results

Lower input costs and cost-saving programs continue to support Hormel Food’s margin growth in recent times. Increased demand for certain popular offerings and an innovation-based growth strategy have lately been aiding the company’s revenue growth. We expect such successful execution of strategies to enhance the company's top- and bottom-line figures in the quarter to be reported. Moreover, Hormel Foods is making concerted efforts to improve its business on the back of competent solutions and value-added marketing tactics. These initiatives will likely support the company's top-line growth in the first quarter of 2016. At the same time, the firm expects to reap substantial benefits from its acquisitions in the quarter.

Nevertheless, amid these positives, this Zacks Rank #2 (Buy) stock is still subjected to certain risks. Persistence of Avian influenza continues to create operational challenges for meat producers such as Hormel Foods. Also, international trading exposes the company to risks associated with currency headwinds. Based on the existing market conditions, Hormel Foods anticipates earnings within $2.85–$2.95 per share for fiscal 2016.

Earnings Whispers

Our proven model does not conclusively show that Hormel Foods is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for an earnings beat. That is not the case here as we will see below.

Zacks ESP: The stock’s Earnings ESP is 0.00%, as the Most Accurate estimate stands in line with the Zacks Consensus Estimate of 37 cents.

Zacks Rank: Hormel Foods’ Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

Note that we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider, as our model shows these have the right combination of elements to post an earnings beat:

Boyd Gaming Corporation BYD, with an Earnings ESP of +7.14% and a Zacks Rank #2.

MGM Resorts International MGM, with an Earnings ESP of +50.00% and a Zacks Rank #2.

SeaWorld Entertainment, Inc. SEAS, with an Earnings ESP of +10.00% and Zacks Rank #2.

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