Morningstar Rating

Stock Research and Analysis

by Ken Perkins

Bulls Say

Hillshire Brands' portfolio contains several category leaders. Successful brand investment and innovation objectives should make organic sales growth and margin expansion targets achievable.
Previously, Sara Lee operated several businesses with little overlap, which made for difficult capital allocation. Hillshire's more focused business should allow the firm to allocate capital more effectively.
The acquisition of Pinnacle Foods will increase Hillshire's revenue by more than 50% and give the firm opportunities to cross-sell products and improve customer relationships. Read more 

Bears Say

Although Hillshire operates a portfolio of well-known brands, it competes in a number of categories in which price is still a primary factor influencing purchase decisions.
Retail consolidation could shift negotiating leverage away from food manufacturers in favor of retailers, which could hurt the firm's ability to expand margins over the long term.
Hillshire Brands is taking on considerable leverage to finance the acquisition of Pinnacle Foods. Debt/EBITDA will increase to about 5 times, while the dividend will remain flat and share repurchases nonexistent for a couple years. Read more 

Management

A number of new faces joined Hillshire Brands upon the split-up of the former Sara Lee. Sean Connolly, named CEO in January 2012, worked in various roles at Campbell Soup and Procter & Gamble before joining Hillshire Brands. We think his previous   Read more 

Profile

Hillshire Brands manufactures and distributes value-added and commodity meat products, with a brand portfolio that includes Hillshire Farms, Jimmie Dean, Sara Lee, Ball   Read more 

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