Austin, Minnesota-based Hormel Foods Corporation (HRL) is a leading manufacturer as well as marketer of various meat and food products. It develops and distributes various meat, nuts, and other food products to retail, foodservice, and commercial customers. With a market cap of $16.1 billion, Hormel Foods operates in over 80 countries through its Retail, Foodservice, and International segments.
The packed foods major has substantially underperformed the broader market over the past year. Hormel Foods stock prices have plummeted 8.4% on a YTD basis and 9.6% over the past year lagging behind the S&P 500 Index’s ($SPX) 23.6% gains in 2024 and 30.6% returns over the past 52 weeks.
Narrowing the focus, Hormel Foods has also underperformed the First Trust Nasdaq Food & Beverage ETF’s (FTXG) 2.1% dip on a YTD basis and 1.6% gains over the past year.
Hormel Foods has been facing several challenges including soft consumer demand, inflationary pressures, continued challenges in its turkey business due to lower prices for whole-bird, and elevated selling costs which have led to a decline in its stock prices. HRL stock prices plunged 6.4% following the release of its Q3 earnings on Sep. 4. Its Retail segment volumes were down 9.1% compared to the year-ago quarter while the International segment also experienced a massive volume decline of 13.3%. This led to a 2.2% year-over-year decline in net sales to $2.9 billion. Observing the lackluster performance during the quarter, Hormel Foods decreased its full-year net sales guidance to $11.8 billion to $12.1 billion, unsettling investor confidence.
Moreover, HRL also observed a decline in profitability with its adjusted EPS declining 7.5% year-over-year to $0.37. However, on a positive note, its earnings surpassed analysts’ consensus estimates by a notable 2.8%.
Analysts expect Hormel Foods to report a 1.9% year-over-year drop in adjusted EPS to $1.58 for the fiscal 2024 ended in October. The company has a mixed earnings surprise history. It has surpassed analysts' consensus estimates in three of the past four quarters while missing on another occasion.
HRL stock has a consensus “Hold” rating overall. Out of the nine analysts covering the stock, one advises “Strong Buy,” six suggest “Hold,” one recommends “Moderate Sell,” and one advocates a “Strong Sell” rating.
This configuration is slightly bearish compared to a month ago, when no analyst advocated a “Strong Sell” rating.
On Oct. 21, Exane BNP Paribas analyst Max Gumport initiated an “Underperform” rating on HRL with a $28 price target.
HRL’s mean price target of $32 represents a premium of 8.8% to current price levels. Meanwhile, the Street-high target of $36 suggests a potential upside of 22.4%.
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