The trouble with quality food companies is that they rarely get cheap, and when they do it's often because of some significant erosion in the fundamentals. That's the case today with Kellogg (NYSE:K), as cutting too deeply as part of a cost restructuring program, has sapped some of the almost-legendary reliability of that company's earnings stream. Perhaps counter-intuitively, investors may need to hope for something similar at Hormel (NYSE:HRL). This is an excellent company in many respects, but it's hard to argue for chasing the stock at these prices.
The End of the Year was Better than It Seems
At first look, it may seem that Hormel's quarter was a laggard, compared to the likes of Sara Lee (NYSE:SLE) or Tyson (NYSE:TSN). Certainly, revenue growth of just 2% does not look all that impressive and it would seem that stronger pricing (up 9%) killed volume (down 7%). All is not always at it seems though; Hormel's volume decline had everything to do with one less week in the quarter and was otherwise basically stable, a result much more in line with its comparables.
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