Supervalu's announcement Wednesday that it is seeking "strategic alternatives" sent the stock price down in after hours trading and down even further when trading opened Thursday. At one point it was trading down more than 50 percent from Wednesday's closing price.
Equity analysts Kenneth Goldman at JPMorgan and Alton Stump at Longbow Research quickly downgraded their buy recommendations to neutral. According to ratings tracked by Bloomberg, Supervalu had only one "buy" rating, 15 "holds" and three "sells."
Credit analysts also downgraded their ratings on the Eden Prairie-based supermarket operator's credit facilities. Fitch Ratings moved its Issuer Default Rating on Supervalu from "B" to "CCC".
Janney Capital Markets analysts have downgraded their rating on Austin-based Hormel to "sell." The firm had maintained a "neutral" rating on Hormel for more than three years.
Analysts Jonathan Feeney and Mark Williams cited three reasons for their downgrade of the maker of prepared foods. They cited "1) Renewed rising corn (feed) costs and the likely effect on pork and turkey margins; 2) sustained weakness in the pork cutout margin through Q3; and 3) relatively high valuation ... vs. higher-margin packaged food competitors."
With much of the Midwest's corn crop facing drought conditions, the prospects for further spikes in the cost of feed could affect margins on Hormel's pork and turkey products. The Janney analysts believe a further spike in corn prices would be "catching Hormel less hedged than in prior years."
Hormel has two "buy" ratings from analysts, six "hold" ratings and two "sell" ratings.