There is a lot of Spam grilling going on at quarantined households right now.
Hormel CEO — maker of the nation’s unofficial canned meat — Jim Snee tells Yahoo Finance sales of Spam have been strong during the coronavirus pandemic. Snee hinted the 80-year-old brand’s record-setting sales pace is unlikely to be halted this year.
“We were already off to a great start with Spam. This would be our sixth consecutive year of record sales. I think the significant uptick we are seeing through this crisis puts us well on our way,” Snee said on Yahoo Finance’s The First Trade. “But even before this uptick, our Spam business has been really, really strong. It’s connecting with consumers, it’s on trend and more relevant than it has ever been.”
Yahoo Finance reporter Heidi Chung would agree.
So would investment bank Goldman Sachs, which upgraded Hormel’s stock to Hold from Sell Thursday on optimism around pantry stock up amidst the coronavirus. Hormel owns other leading shelf stable food brands such as Skippy and Applegate.
“Put simply, our prior Sell thesis was predicated on an already-premium valuation, underwhelming earnings growth outlook, and margin pressure on pork raw materials from ASF-driven supply deficits/demand. These headwinds have been overtaken by a rapidly evolving domestic demand environment from COVID-19 where we expect HRL to be a net beneficiary, with raw material trends across pork/hog markets becoming more favorable, while HRL’s under-levered balance sheet and secure dividend are more appealing amidst recent market volatility,” wrote Goldman Sachs analyst Adam Samuelson.
Samuelson points to some pretty bullish sales data from food industry tracker Nielsen.
“HRL’s sales growth accelerated to 13.1% in the week ending 3/7 from 4.3% in the four-weeks ending 2/29, with gains in both shelf-stable (peanut butter, canned meat/chili) and refrigerated offerings (notably Hormel Compleats and Refrigerated Entrees),” notes Samuelson.
The analyst has a $45 price target on Hormel, estimating about 7% upside from current levels.
Acknowledges Snee, “Demand across our entire line of retail products have been very, very strong.”
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