Hormel
HRL
$19.42
-0.67%
Hormel Foods Corporation is a branded packaged foods company that sells primarily through US retail (61.6% of fiscal 2025 sales), US foodservice (32.6%), and international (5.9%) channels, with a portfolio spanning perishable proteins (73% of sales) and shelf-stable goods (27%) under brands including Hormel, Spam, Jennie-O, Columbus, Applegate, Planters, and Skippy. Many of these brands hold the number one or two market share positions in their categories, giving Hormel a defensible position as a scaled, diversified protein and center-store platform rather than a single-category meat processor. The current investor narrative is dominated by a growth turnaround that has stalled: the August 2026 fiscal Q3 print featured a revenue miss and a guidance cut that sent shares down roughly 10% in a single session, reviving concerns about demand weakness and dividend sustainability, even as management pursues portfolio reshaping via the Brakebush foodservice chicken acquisition and the divestiture of the volatile whole-bird turkey business. Debate now centers on whether these strategic moves toward higher-margin value-added proteins can offset soft volumes, commodity cost pressure, and a payout ratio that has exceeded 100% of earnings, with the stock's deep underperformance versus the market reflecting skepticism that a durable earnings inflection is near.…
HRL
Hormel
$19.42
Related headlines
Investment Opinion: Should I buy HRL Today?
The synthesized recommendation is Hold. The core thesis is that Hormel is a deeply undervalued branded staples company with a sustainable dividend and potential for margin recovery, but near-term headwinds and execution risks warrant caution until there is evidence of a turnaround. The analyst consensus rating of 'hold' (mean 2.6) and average target price of $25.94 (28.1% upside) align with this view, suggesting the stock is fairly valued at current levels with limited near-term catalysts.
Supporting evidence includes the attractive valuation: PS of 1.08x and PB of 1.65x are well below historical averages, and the forward PE of 12.89x implies a significant earnings rebound. The FCF yield of 6.0% and dividend yield of 4.85% provide income support, while the current ratio of 2.47 and debt-to-equity of 0.36 indicate a strong balance sheet. However, revenue growth is negative (-2.36% YoY), gross margins are thin at 15.92%, and ROE is a weak 6.05%, highlighting operational challenges.
The biggest risks are a dividend cut (payout ratio 132.4%), continued margin compression, and integration risks from the Brakebush acquisition. The rating would upgrade to Buy if gross margins stabilize above 16% and revenue growth turns positive, or downgrade to Sell if the dividend is cut or revenue declines accelerate. Relative to its history and peers, the stock appears undervalued on sales and book value, but the high trailing PE and low profitability suggest the discount is justified until fundamentals improve.
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HRL 12-Month Price Forecast
Hormel presents a classic value trap versus value opportunity dilemma. The stock is cheap on sales and book value, and the high dividend yield is attractive, but the underlying business is deteriorating with negative revenue growth and margin compression. The forward earnings estimate of $1.658 is the linchpin; if achieved, the stock could re-rate significantly, but the recent guidance cut and lack of positive catalysts suggest downside risks remain. The low beta of 0.315 offers defensive characteristics, but the company-specific issues dominate. I would upgrade to bullish if gross margins stabilize above 16% and revenue growth turns positive, and downgrade to bearish if the dividend is cut or revenue declines accelerate.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Hormel's 12-month outlook, with a consensus price target around $25.56 and implied upside of +31.6% versus the current price.
Average Target
$25.56
0 analysts
Implied Upside
+31.6%
vs. current price
Analyst Count
—
covering this stock
Price Range
$23 - $30
Analyst target range
Coverage of Hormel is moderate, with 8 analysts contributing to the consensus. The recommendation distribution is uniformly cautious: the consensus recommendation is "hold" with a recommendation mean of 2.6 (on a scale where 1 is strong buy and 5 is strong sell), and the institutional ratings history shows a striking pattern of Neutral/Equal Weight reiterations from BNP Paribas, JP Morgan, Stephens & Co., and B of A Securities throughout 2026 — with the only notable action being JP Morgan's downgrade from Overweight to Neutral on April 9, 2026. The average target price of $25.94 implies roughly 28.1% upside from the current price of $20.25, which appears generous relative to the uniformly neutral ratings and likely reflects targets set before or shortly after the August guidance cut that has not yet been fully reflected in all published targets.
The target range spans $23.00 to $30.00, a spread of $7.00, or roughly 30% of the low target — a wide dispersion that signals meaningful uncertainty about the earnings recovery path. The high target of $30.00 implies roughly 48% upside and would require both multiple expansion and successful execution on the Brakebush foodservice growth strategy plus margin recovery toward historical norms; it effectively prices in a full turnaround. The low target of $23.00 implies about 13.6% upside and likely assumes only modest stabilization, with continued margin compression and demand weakness limiting the re-rating. Notably, even the low target sits above the current price, suggesting analysts see the stock as oversold relative to fundamental value — but the absence of any Buy ratings and the recent downgrade pattern indicate low conviction in a near-term catalyst. The consensus estimated EPS of $1.658 (range $1.559-$1.757) and estimated revenue of $12.55 billion (range $12.40-$12.73 billion) imply analysts expect modest top-line stabilization and a significant earnings rebound, and the credibility of that rebound is the single most important variable for whether the wide target spread resolves upward or downward.
Bulls vs Bears: HRL Investment Factors
The bear case currently has stronger evidence, driven by deteriorating fundamentals: negative revenue growth, collapsing margins, a stretched dividend, and a technical downtrend. The bull case rests on deep value metrics (1.08x PS, 1.65x PB), a high FCF yield, and the potential for a margin recovery from strategic initiatives, but these are speculative until execution proves out. The single most important tension is whether the forward EPS estimate of $1.658 is achievable; if it is, the stock is undervalued, but if it slips further, the dividend and valuation are at risk. Given the recent guidance cut and lack of positive catalysts, the bear case holds more weight in the near term.
Bullish
- Deep value on sales and book: HRL trades at just 1.08x trailing sales and 1.65x book value, well below its historical range (PS was 4.10x in Q4 2025 and 5.41x in Q4 2024). This suggests the market has already priced in significant deterioration, limiting further downside from multiple compression.
- Forward earnings imply massive rebound: The forward PE of 12.89x versus trailing PE of 27.29x implies consensus expects EPS to more than double from $0.74 to $1.658. If achieved, the stock is cheap; the wide gap highlights the market's disbelief, which could reverse if any positive catalyst emerges.
- Attractive free cash flow yield: Trailing free cash flow of $780.9 million against a market cap of ~$13.1 billion yields 6.0%, providing ample coverage for the $160.96 million quarterly dividend even with a 132.4% payout ratio. This cash generation supports the dividend and potential reinvestment.
- Analyst targets imply upside: The average analyst target of $25.94 represents 28.1% upside from the current $20.25, and even the low target of $23.00 implies 13.6% upside. This suggests analysts see the stock as oversold relative to fundamental value, despite their neutral ratings.
Bearish
- Revenue and margins deteriorating: Q3 2026 revenue fell 2.36% YoY to $2.961 billion, missing guidance, while gross margin compressed to 15.92% from 16.07% a year ago and net margin collapsed to 2.01%. The sequential decline from Q1 to Q3 and the guidance cut signal persistent demand weakness and cost pressures.
- Dividend coverage is stretched: The payout ratio of 132.4% means dividends exceed net income, funded by cash flow. With quarterly dividends of $160.96 million and operating cash flow of $240.6 million in Q3, the margin for error is thin; any further earnings deterioration could force a dividend cut, which would likely trigger a sharp selloff given the 4.85% yield.
- Earnings volatility and weak returns: Net income swung from $181.7 million in Q1 2026 to $59.6 million in Q3, following a Q4 2025 loss of -$56.1 million. ROE of 6.05% and ROA of 4.63% are well below sector averages, indicating poor profitability and inefficient capital use.
- Analyst skepticism and downgrades: The consensus recommendation is 'hold' with a mean of 2.6, and JP Morgan downgraded to Neutral in April 2026. No analysts rate it a Buy, and the wide target range ($23-$30) reflects uncertainty about the earnings recovery, with targets likely not fully updated post-Q3 miss.
HRL Technical Analysis
Hormel is in a sustained downtrend that has recently transitioned into a fragile bottoming attempt. The stock is down 17.88% over the past year and 13.42% year-to-date, with the current price of $20.25 sitting at just 11.6% above its 52-week low of $19.42 and 23.9% below its 52-week high of $26.60 — positioning it in the lower quartile of its 52-week range. That location near the lows signals persistent distribution rather than momentum, though the proximity to the 52-week low also frames the stock as a potential value/mean-reversion candidate for contrarian buyers rather than a momentum vehicle. The maximum drawdown of -25.65% over the period confirms that holders have endured a materially painful decline with no sustained recovery trend in place.
Short-term momentum is decisively negative and diverging from an already weak longer-term trend. The stock is down 8.16% over the past month and 19.0% over the past three months, meaning the 3-month decline is steeper than the 1-year decline of 17.88% — evidence that selling pressure has accelerated rather than abated. This deterioration is corroborated by relative strength: HRL has underperformed SPY by 8.75 percentage points over 1 month and 22.34 points over 3 months, while SPY itself gained 0.59% and 3.34% over those same windows. The sharp August 27 gap-down from $23.71 to $21.28 (a single-session drop of roughly 10%) on the Q3 revenue miss and guidance cut marks the catalyst for the recent leg lower, and the failure to reclaim pre-gap levels despite a modest bounce to $20.25 suggests the market has repriced the fundamental outlook rather than treated the selloff as an overreaction.
Key technical levels are well defined by the 52-week range. Support rests at the 52-week low of $19.42, with the recent September 25 close of $19.71 representing a successful retest of that zone; a decisive breakdown below $19.42 would signal capitulation and likely open the door to new multi-year lows, particularly given the stock's short ratio of 3.68 days-to-cover, which indicates a meaningful short base that could either fuel a squeeze on a reversal or add pressure on further weakness. Resistance sits at the 52-week high of $26.60, with intermediate resistance around the $23.70-$24.00 area where the August gap originated; reclaiming that zone would be the first credible evidence of a trend change. Volatility is a critical consideration: the beta of 0.315 means HRL moves only about 32% as much as the broader market, so despite the painful absolute drawdown, the stock is a low-beta defensive name — position sizing should account for the fact that its declines are driven by company-specific fundamentals rather than market-wide risk appetite, and its low beta offers limited portfolio diversification benefit during equity selloffs.
Beta
0.29
0.29x market volatility
Max Drawdown
-26.7%
Largest decline past year
52-Week Range
$19-$27
Price range past year
Annual Return
-18.7%
Cumulative gain past year
| Period | HRL Return | S&P 500 |
|---|---|---|
| 1m | -8.4% | +1.0% |
| 3m | -21.5% | +2.5% |
| 6m | -6.9% | +13.9% |
| 1y | -18.7% | +15.0% |
| ytd | -17.0% | +13.5% |
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HRL Fundamental Analysis
Hormel's revenue trajectory has turned negative and is deteriorating. Fiscal Q3 2026 (quarter ended July 26, 2026) revenue was $2.961 billion, down 2.36% year-over-year versus the $3.033 billion reported in the year-ago quarter, and the sequential trend is also soft: revenue declined from $3.027 billion in Q1 2026 to $2.973 billion in Q2 to $2.961 billion in Q3. Segment data shows the Retail segment at $1.779 billion and Foodservice at $1.003 billion as the two dominant contributors, with International a small $179 million piece that has reportedly swung to losses — meaning the growth engine must come from retail and foodservice, where demand weakness and the Brakebush integration (with near-term earnings dilution flagged by analysts) create a cloudy near-term outlook. The revenue miss and accompanying guidance cut in August confirm that the top line is not yet stabilizing, which undermines the bull case for a near-term earnings recovery.
Profitability has compressed sharply and unevenly across recent quarters. Q3 2026 net income was just $59.6 million on a 2.01% net margin, with gross margin of 15.92% — down from 16.07% in the year-ago Q3 and well below the 17.44% gross margin posted in Q2 2026. The quarterly net income pattern is highly volatile: $181.7 million in Q1 2026, $157.5 million in Q2, then a collapse to $59.6 million in Q3, following a Q4 2025 net loss of -$56.1 million. Operating margin of 5.94% and EBITDA margin of just 6.39% in Q3 (versus 9.91% in Q2) highlight severe cost pressure, likely from commodity input costs and the beef/cattle inflation backdrop noted in news coverage. For a packaged foods company, a 15.6% gross margin is thin and a 2% net margin is far below the mid-single-digit levels Hormel historically earned, indicating the company is currently earning inadequate returns on its revenue base.
Balance sheet and cash flow metrics are the relative bright spot but carry a dividend-coverage warning. The current ratio of 2.47 and debt-to-equity of 0.36 indicate a conservatively leveraged balance sheet with ample short-term liquidity, and trailing free cash flow of $780.9 million against a market cap of roughly $13.1 billion implies an FCF yield of about 6.0% — attractive in absolute terms. However, ROE of just 6.05% and ROA of 4.63% are weak for a consumer staples franchise, and the payout ratio of 132.4% means dividends paid ($160.96 million in Q3 alone) exceed net income, funded by cash flow rather than earnings. With quarterly capital expenditure running $68-82 million and dividends consuming roughly $161 million per quarter, the company is generating enough operating cash flow ($240.6 million in Q3) to cover the payout for now, but the thin coverage margin leaves little room for error if earnings continue to deteriorate.
Quarterly Revenue
$3.0B
2026-07
Revenue YoY Growth
-2.4%
YoY Comparison
Gross Margin
15.9%
Latest Quarter
Free Cash Flow
$780869000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is HRL Overvalued?
Because Hormel is profitable on a trailing basis, the PE ratio is the appropriate primary metric, though the trailing figure is distorted by the Q4 2025 loss and the Q3 2026 earnings collapse. The trailing PE stands at 27.29x against a forward PE of 12.89x — an extraordinarily wide gap that implies the market expects earnings to more than double, consistent with consensus estimated EPS of $1.658 versus trailing EPS of roughly $0.74. This gap is the crux of the valuation debate: if the forward estimate is achieved, the stock is cheap; if the earnings recovery slips, the trailing multiple of 27x on depressed earnings makes the stock look expensive. The PEG ratio of -0.67 is not meaningful given the negative earnings growth base, and the PS ratio of 1.08x and EV/Sales of 1.07x provide cleaner, earnings-independent context.
Relative to the packaged foods sector, Hormel screens as a discount name on most metrics. The PS ratio of 1.08x and EV/EBITDA of 15.17x are modest for a branded staples company with number-one or number-two category positions, and the PB ratio of 1.65x is well below the 2.1x-3.8x range the stock commanded from 2021 through 2024. The dividend yield of 4.85% is exceptionally high for the sector and reflects the stock's price decline rather than a payout increase — a yield this far above the staples average typically signals the market is pricing in dividend risk, consistent with the 132.4% payout ratio. The premium/discount assessment therefore cuts both ways: the low PS and PB suggest the market has de-rated the franchise, while the high yield and elevated trailing PE suggest the de-rating may be fundamentally justified until margins and volumes stabilize.
Historically, Hormel's valuation sits near the bottom of its multi-year band. The PS ratio has compressed from 5.41x in Q4 2024 and 4.10x in Q4 2025 to 1.08x today, and the PB ratio has fallen from 2.12x (Q4 2024) and 1.65x (Q4 2025) to 1.65x currently — with the Q3 2026 historical reading of 1.83x PB and 4.84x PS reflecting the pre-selloff price. The trailing PE of 27.29x looks high only because earnings are cyclically depressed; on normalized earnings the multiple would be far lower. This combination — historically low PS/PB alongside a high trailing PE and high dividend yield — is the classic signature of a value trap versus value opportunity inflection point: the market is pricing in either a durable margin recovery (making today's price attractive) or continued fundamental deterioration (making the yield unsustainable). Resolution likely hinges on whether the Brakebush integration and portfolio reshaping can restore gross margins toward the 16-17% range and net margins toward 5-6%.
PE
27.3x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 19x~34x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
15.2x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are elevated. The company's payout ratio of 132.4% means dividends are not covered by earnings, and with net income of only $59.6 million in Q3 2026 against $160.96 million in dividends, the company relies on cash flow to sustain the payout. Free cash flow of $780.9 million provides some cushion, but if earnings continue to decline, a dividend cut becomes likely. Additionally, revenue is concentrated in US retail (61.6% of sales) and perishable proteins (73%), exposing Hormel to demand shifts and commodity price volatility, as evidenced by the 2.36% YoY revenue decline and gross margin compression to 15.92%.
Market and competitive risks include valuation compression and sector headwinds. The stock's low beta of 0.315 means it is less sensitive to market swings, but its underperformance is driven by company-specific issues, offering little diversification benefit. The packaged foods sector faces intense competition from private labels and changing consumer preferences, and Hormel's international segment has swung to losses, adding pressure. The high dividend yield of 4.85% may attract income investors, but if the payout is cut, the stock could face a sharp re-rating. Regulatory risks, such as changes in food labeling or trade policies, could also impact margins.
In a worst-case scenario, continued revenue declines and margin compression could lead to a dividend cut and further earnings deterioration. The 52-week low of $19.42 represents a 4.1% downside from the current price of $20.25, but if the stock breaks below that level, it could test multi-year lows. The analyst low target of $23.00 is above the current price, but if forward EPS estimates are revised down, the stock could fall to $18-$19, implying a 6-11% loss. A more severe scenario, such as a recession or competitive disruption, could push the stock down to $16-$17, a 16-21% decline from current levels. The max drawdown of -25.65% over the past year shows the potential magnitude of losses in adverse conditions.
FAQ
The most severe risk is a dividend cut, given the 132.4% payout ratio and $160.96 million quarterly dividend exceeding net income of $59.6 million. Financial risks include revenue concentration in US retail (61.6%) and perishable proteins (73%), exposing the company to demand shifts and commodity volatility. Competitive risks include private-label competition and changing consumer preferences, while the international segment is loss-making. Macro risks include input cost inflation, as evidenced by record beef prices, and a low beta of 0.315 offers little diversification. Company-specific risks include integration challenges from the Brakebush acquisition and execution of the portfolio reshaping strategy.
The 12-month forecast is neutral with a slight bullish bias if the turnaround succeeds. The base case (55% probability) targets $23-$26, assuming earnings meet the $1.658 consensus and the dividend is maintained. The bull case (25% probability) targets $26-$30, driven by successful Brakebush integration and margin recovery. The bear case (20% probability) targets $19.42-$23, assuming a dividend cut and continued revenue declines. The most likely scenario is the base case, hinging on gross margin stabilization above 16% and revenue growth turning positive. Key catalysts include Q4 2026 earnings and guidance for fiscal 2027.
HRL appears undervalued on sales and book value, with a PS ratio of 1.08x and PB ratio of 1.65x, well below historical averages of 4-5x and 2-3x, respectively. However, the trailing PE of 27.29x is high because earnings are depressed; the forward PE of 12.89x suggests the market expects a significant earnings rebound. The dividend yield of 4.85% is elevated, signaling perceived risk. Relative to peers in packaged foods, HRL trades at a discount, but the low profitability (ROE 6.05%) justifies some discount. The market is pricing in either a successful turnaround or continued deterioration; resolution depends on margin recovery and revenue stabilization.
HRL is not a clear buy at current levels; it is a hold for income-focused investors willing to tolerate risk. The stock trades at $20.25, with a forward PE of 12.89x and a dividend yield of 4.85%, but the payout ratio of 132.4% raises concerns about dividend sustainability. Analyst targets imply 28.1% upside to $25.94, but the consensus rating is hold, and the company recently missed revenue estimates and cut guidance. The biggest downside risk is a dividend cut, which could push the stock toward its 52-week low of $19.42. For risk-tolerant investors, it could be a good buy if gross margins stabilize above 16% and revenue growth turns positive, but otherwise, it is a value trap.
HRL is more suitable for long-term investment, given its defensive characteristics, low beta of 0.315, and dividend yield of 4.85%, but only for patient investors who can withstand near-term volatility. The stock is in a downtrend, with a 17.88% decline over the past year, and lacks near-term catalysts, making it a poor short-term trading candidate. The earnings recovery is expected to take several quarters, and the dividend, while at risk, provides income. A minimum holding period of 2-3 years is suggested to allow for the strategic initiatives to bear fruit and for potential multiple expansion. Short-term traders should avoid due to high uncertainty and negative momentum.