Are Insiders Selling Shares Of Hormel? 

Insiders Are Selling Hormel But Don’t Worry About It 

Insiders have been selling shares of Hormel (NYSE: HRL) this year but there are several factors in play that make the news meaningless. To start, insiders only own about 0.8% of the company and sales are a mere drop in the bucket in terms of market cap and share count. As for who’s selling, it is a veritable vegetable soup of VP’s, EVP’s, and SVP’s with a director or two thrown in for good measure. More importantly, the institutions have been net buyers this year and have driven their ownership up to over 40% which we take as a positive sign for the business. Hormel isn’t a flashy growth stock but it is a high-quality dividend payer and dividend growth stock so one we like to pay attention to. 

Hormel Beats And Provides Favorable Outlook 

Hormel had a good quarter supported by robust demand, organic growth, and the addition of Planters. The company reported $3.45 billion in net revenue which is good for a gain of 42.6% over last year and beat the Marketbeat.com consensus by 710 basis points. The strength was driven by demand in all segments with a total volume of 1.4 billion pounds or up 14%. On an organic basis, sales are up 32%. On a segment basis, grocery items led with a gain of 20% and were followed by a 15% increase in refrigerated items, a 1% gain in Jenny-O, and were offset by a 4% decline overseas. On a channel basis, all channels saw robust double-digit gains led by a 72% increase in Foodservice sales. 

Moving down the report, the company was able to widen the margin in all segments but Jenny-O. The small contraction in Jenny-O margins was, however, offset by strength in the other categories and drive significant improvement in cash flow, free cash flow, and earnings. The company’s GAAP EPS of $0.51 is up 25% from last year and beat the Marketbeat.com consensus by a penny. 

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The company is expecting strength to continue into the next year and has guided revenue and earnings favorably. The catch is that the range for revenue and earnings is bracketing the consensus albeit with the consensus in the lower half of the range. Regardless, the guidance is a positive indication of business and we see room for upside surprises in the numbers. Execs are expecting revenue in the range of $11.72 to $12.5 billion versus the consensus of $11.96 and for EPS of $1.87 to $2.03 versus the $1.94 expected by the sell-side analysts. 

"The momentum we gained in the third and fourth quarters gives us confidence heading into fiscal 2022, and we expect all four segments to deliver sales and earnings growth," Snee said. "Strength in the Planters® snack nuts business and organic growth in each segment will drive growth in excess of our long-term growth goals."

The Technical Outlook: Hormel Confirms Trend 

Shares of Hormel opened flat following the Q4 release and 2022 guidance but moved up sharply in early trading. The move has shares up more than 4% and forming a Double-Bottom pattern that not only indicates a reversal but confirms the long-term uptrend as well. In our view, this is a strong signal for the market and one that is confirmed by the indicators as well. Both MACD and stochastic are firing strong bullish crossovers in tandem with today’s move and point to higher prices to come. Now that price action is back above the $44 level we see it moving on up to the $48 to $50 range next. 

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