Why Hillshire Brands Co Is Looking More Delicious

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Hillshire Brands (NYSE: HSH  ) gained slightly this morning after Wells Fargo upgraded the meat-centric food company from underperform to market perform.

So what: Along with the upgrade, analyst John Baumgartner boosted his price target to $33-$34 (from $28-$30), representing about 6% worth of downside to yesterday's close. While Baumgartner isn't exactly bullish on Hillshire's appreciation prospects, he thinks that its margin-pressuring headwinds are letting up a bit.

Now what: Wells Fargo boosted its 2014 EPS forecast for Hillshire from $1.61 to $1.69, but maintained its 2015 view of $1.90. "To be clear, FQ2 benefited from favorable expense timing (lower MAP spend and corporate expense worth ~$0.10 vs. our model) and for FY14, we estimate advantageous corporate expense is worth $0.03-0.04/share," noted Baumgartner. "That said, the worst of the commodity storm has likely passed, productivity benefits are emerging, and we believe such savings are capable of limiting the potential downside risk to EPS over the next two quarters." Of course, with the stock sporting a P/E of 20, I wouldn't be so quick to buy in just yet. 

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