Pilgrim’s Pride Corporation (PPC), ConAgra Foods, Inc. (CAG), Hormel Foods Corporation (HRL): Transforming Trends Are Your Portfolio’s Best Friend

We love peanut butter but not Spam
A company that might tempt you is Hormel Foods Corporation (NYSE:HRL), not because of its price to sales of 1.31 or its best-known product, Spam, but because it has paid out a dividend, now yielding 1.6%, for 340 consecutive quarters.

But that’s not necessarily a reason to buy it when the fundamentals, growth, and yield at rival ConAgra are better. Hormel Foods Corporation (NYSE:HRL)’s PEG is 1.98, higher than ConAgra’s. Its price to book ratio is 3.68, also higher than ConAgra’s 2.5.

Hormel Foods Corporation (NYSE:HRL) reported earnings on August 21 and disappointed with third-quarter EPS of $0.42, but sales at $2.2 billion were up 8%, partly thanks to its Skippy peanut butter acquisition in January. Compared to the Ralcorp buy, indeed “transforming” for ConAgra, Skippy isn’t enough reason to buy Hormel Foods Corporation (NYSE:HRL), no matter how much Americans love it. Its Jennie-O Turkey Stores segment just started turning the corner this quarter, but its Spam family’s sales declined. Refrigerated foods struggled, weighed down by elevated pork-commodity costs.

In fairness, its international segment outperformed, with revenue up 31%. Chief executive officer Jeffrey Ettinger said on the call:  “International… [has] become a more and more meaningful component of our overall performance and it’s one that I think we’ve articulated in the past. We have solid expectations that it will grow at a faster rate than our overall company average.”  He added once Skippy is integrated in China, it should boost business there to $100 million in the next fiscal year.

The Foolish takeaway
There are good reasons to consider ConAgra Foods, Inc. (NYSE:CAG) and those are yield plus Ralcorp. Pilgrim’s Pride Corporation (NASDAQ:PPC) has more than tripled, remember, so be careful. But the trend is your friend with multi-year chicken consumption on the rise. As for Hormel Foods Corporation (NYSE:HRL), these other names are better long-term investments than a consumer staple with declining segment sales.

The article Transforming Trends Are Your Portfolio’s Best Friend originally appeared on Fool.com and is written by AnnaLisa Kraft.

AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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