Hormel Foods Underperforms Despite Dividend Increase and Future Optimism

A Closer Look at Recent Earnings and Stock Performance

With a market capitalization of $15.6 billion, Hormel Foods Corporation (HRL) is a key player in the food industry, focusing on meat products, nuts, and more. Based in Austin, Minnesota, the company markets its goods under over 30 brands, including HORMEL, SPAM, Jennie-O, Skippy, Planters, and Applegate.

Stark Contrast with Broader Market Trends

Over the past year, shares of Hormel Foods have struggled relative to the overall market. HRL has decreased by 1.2% while the S&P 500 Index ($SPX) has surged by 22.3%. Year-to-date (YTD), the stock is down 9.3%, compared to a 4% rise in the SPX.

When comparing its performance to the Consumer Staples Select Sector SPDR Fund’s (XLP)—which has a 10.9% return over the past year and a 2.5% YTD gain—the underperformance of Hormel becomes even clearer.

Quarterly Earnings Show Mixed Results

Hormel Foods reported its fourth-quarter earnings on December 4. The stock saw a slight uptick despite the mixed results. Total revenue fell by 1.9% year-over-year to $3.1 billion, though it met analysts’ expectations. Adjusted earnings came in at $0.42 per share, flat compared to the previous year, missing the consensus estimate of $0.43. The decline in revenue was largely attributed to decreased retail segment sales and a 4.1% drop in overall volumes.

Dividend Increase Sparks Investor Interest

Investor sentiment turned more positive as the company announced a 3% increase in its annual dividend, now set at $1.16 per share. This marks the 59th consecutive year of dividend increases for Hormel. Additionally, for fiscal 2025, Hormel anticipates $100 to $150 million in benefits from its Transform and Modernize initiative, aiming to boost operational efficiency. These factors may have contributed to the stock’s modest rise.

Future Earnings Outlook and Analyst Ratings

For the fiscal year ending in October, analysts predict that Hormel Foods’ earnings per share (EPS) will grow by 4.4% year-over-year, reaching $1.65. The company’s earnings history has been mixed, as it beat Wall Street estimates in three of the last four quarters while falling short once.

Currently, nine analysts cover Hormel stock, giving it a consensus rating of “Hold.” This comprises two “Strong Buy” ratings, five “Hold” ratings, one “Moderate Sell,” and one “Strong Sell.”

Analyst Actions and Price Targets

In a recent evaluation, Citi analyst Thomas Palmer reaffirmed a “Buy” rating for HRL, albeit reducing its price target to $35, suggesting a potential upside of 23%. The average price target set at $32.14 indicates a 12.9% upside from current levels, while the highest target of $36 implies a possible increase of 26.5%.

On the date of publication, Neharika Jain did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information provided is for informational purposes only. For further details, refer to the Barchart Disclosure Policy.

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