Hormel Foods Reports Mixed Q4 Results Amid Market Lag

Hormel Foods shares rise slightly after mixed Q4 results. Revenue dropped 1.9%, but adjusted EPS met expectations. Dividend increased, improving investor sentiment.

Date: 18-02-2025

AI Rating: 5

Performance Overview: Hormel Foods Corporation, valued at a market cap of $15.6 billion, has faced significant underperformance, lagging behind both the broader S&P 500 Index and the Consumer Staples Select Sector SPDR Fund over the past year. The stock has declined 1.2% compared to a 22.3% increase in the S&P 500, highlighting a concerning trend for investors.

Q4 Earnings Results: The company's Q4 earnings report revealed a decline in revenue by 1.9% year-over-year, totaling $3.1 billion, which, although it met market expectations, still raises concerns about sales performance. Furthermore, adjusted earnings of $0.42 per share remained flat year-over-year yet fell slightly short of the consensus estimate of $0.43. This disconnect in earnings could indicate challenges in maintaining sales volume, which decreased by 4.1% across all segments.

Dividend Announcement: On a positive note, Hormel Foods raised its annual dividend by 3% to $1.16 per share, marking its 59th consecutive increase. This announcement could bolster investor confidence and potentially support stock price stability, despite the mixed earnings performance.

Future Expectations: Analysts predict a modest growth in EPS of 4.4% for fiscal 2025, targeting $1.65. However, the earnings surprise history is mixed, suggesting varying performance and uncertainties ahead. Additionally, Hormel expects $100 to $150 million in benefits from its Transform and Modernize initiative, aimed at enhancing operational efficiency. Such initiatives may improve profitability in the long term.

Market Sentiment: The consensus rating on Hormel Foods is currently a “Hold,” reflecting mixed sentiments among analysts. One analyst recently upgraded their rating to “Strong Buy,” indicating some belief in potential upside for the stock. The target price from Citi suggests a 23% upside, which may attract investors looking for growth opportunities.

Stocks: HRL XLP