Headquartered in Austin, Minnesota, Hormel Foods Corporation (HRL) develops, processes, and distributes various meats, nuts, and other food products to retail, food service, deli, and commercial customers. Valued at $17.8 billion by market cap, the company’s brands include Planters, Skippy, SPAM, Hormel Natural Choice, Applegate, Justin’s, Wholly, Hormel Black Label, Columbus, Jennie-O, and more than 30 other brands.
Shares of this leading packaged food manufacturer have significantly underperformed the broader market over the past year. HRL has plunged 18% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 27%. In 2024, HRL’s stock is down marginally, compared to the SPX’s 16.8% rise on a YTD basis.
Narrowing the focus, HRL has trailed the First Trust Nasdaq Food & Beverage ETF (FTXG). The exchange-traded fund has declined marginally over the past year. Moreover, the ETF’s 3.8% returns on a YTD basis outshine HRL’s marginal loss.
On May 30, shares of Hormel Foods dropped over 9% following the release of its Q2 earnings results. The company reported net sales of $2.89 billion, falling short of the consensus estimate of $2.97 billion. However, its adjusted EPS of $0.38 exceeded Wall Street's forecast of $0.35. Hormel Foods maintained its fiscal year 2024 net sales growth projection at the 1% to 3% range and revised its adjusted EPS guidance to a range of $1.55 to $1.65, an increase from the previous estimate of $1.51 to $1.65, driven by improved operational efficiency and strategic initiatives.
For the current fiscal year, ending in October, analysts expect Hormel Foods’ EPS to decline marginally year over year to $1.60 on a diluted basis. The company’s earnings surprise history is mixed. It beat the consensus estimate in two of the last four quarters while falling short of expectations on two other occasions.
Among the nine analysts covering HRL stock, the consensus is a “Hold.” That’s based on one “Strong Buy” rating, six “Holds,” one “Moderate Sell,” and one “Strong Sell.”
This configuration is more bullish than a month ago, with the stock having no “Strong Buy” rating.
On Aug. 12, Citigroup Inc. (C) upgraded Hormel Foods from “Neutral” to “Buy,” raising the price target to $37 from $33. The firm expects modest EPS growth in Q3 and FY24, with further increases in FY25 and FY26. Citi’s positive outlook contrasts with broader negative sentiment among analysts, making its Buy rating notable.
The mean price target of $32.33 implies a premium of 1.2% to its current price level. The Street-high price target of $37 suggests an upside potential of 15.8%.
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