Hormel Foods produces all kinds of meat products. Its meat products include fresh, frozen, cured, smoked, cooked and canned meats. Hormel also makes the infamous Spam product, and the company also produces many non-meat products including Skippy peanut butter. Hormel bought Skippy from Unilever in January for $700 million.
The company just recently missed its earnings expectations. Results also came in lower than last year’s on higher grain costs, weaker turkey prices, and costs related to acquisition of Skippy peanut butter. Hormel gets half its revenue from its refrigerated foods segment. Analysts expect Hormel to earn $1.99 per share for 2013, and the company is forecasting earning $1.93 to $2.03 per share.
Pilgrim’s Pride is a pure chicken grower. The company’s primary operations are in the United States, Puerto Rico and Mexico. Pilgrim’s Pride does export whole chickens and chicken parts to more than 100 countries thou.
Over the past year, chicken producers have been hit with high grain prices. Luckily for them, prices have come back down on favorable weather and record corn planting. This year’s corn crop looks to be one of the largest on record if weather remains favorable. That will go straight to Pilgrim Pride’s bottom line as feed costs go down. These lower costs boosted the company’s EPS by 16.7% in the first quarter of this year compared to last year’s first quarter.
Sanderson Farms is the company getting the most attention as a possible acquisition because it has the lowest market cap of the company’s mentioned. The company is a pure-play on chicken like Pilgrim’s Pride. Sanderson Farms provides chicken to Sysco and Buffalo Wild Wings and gets 20% of its revenues from exporting chickens.
Sanderson Farms is set to benefit like Pilgrim’s Pride with lower input costs and improving chicken prices and margins. The company has tight controls and automation when it comes to hatcheries, feed mills, processing and distribution. That is how the company can maintain such consistency with its chicken. Sanderson just built a facility in Waco, Texas that can debone 1,250,000 chickens per week. Retail chicken prices are over 17% higher this year according to the USDA. Increased prices mean increased profits for chicken growers.
How do they all compare?
| Smithfield | Tyson | Hormel | Pilgrim’s Pride | Sanderson | |
| Market Cap | $4.57 billion | $8.87 billion | $10.55 billion | $3.10 billion | $1.59 billion |
| Revenue | $13.11 billion | $33.50 billion | $8.45 billion | $8.27 billion | $2.49 billion |
| Rev Growth | 0.03 | 0.02 | 0.07 | 0.08 | 0.04 |
| EBITDA | $807.90 million | $1.70 billion | $843.17 million | $406.49 million | $154.44 million |
| Gross Margin | 0.11 | 0.06 | 0.16 | 0.05 | 0.07 |
| Net Income | $233.60 million | $529.00 million | $499.00 million | $189.64 million | $53.88 million |
| Operating Margin | 0.04 | 0.04 | 0.09 | 0.03 | 0.04 |
| P/E | 21.56 | 17.15 | 21.41 | 16.34 | 28.49 |
What’s a fool to think?
All 5 companies are very similar with their financials. Tyson and Hormel both have a larger market cap than Smithfield and might be a stretch for a Chinese company to buy. Pilgrim’s Pride and Sanderson Farms both have a smaller market cap than Smithfield and could be two good candidates. The trend worldwide is for a more protein-rich diet and that trend will benefit the meat producers. A fool couldn’t go wrong being exposed to the sector.
Mark Yagalla has no position in any stocks mentioned. The Motley Fool owns shares of Sanderson Farms.
The article After Smithfield Foods, Which of these Companies Is Next? originally appeared on Fool.com.
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