HRL: Tariff Relief And Cost Actions Will Support Earnings Recovery

Analysts have modestly raised their fair value estimate for Hormel Foods to approximately $27.25 from about $26.69 per share, citing updated modeling that reflects slightly stronger expected revenue growth and a higher forward earnings multiple, which more than offsets a small pullback in forecast profit margins.

Analyst Commentary

Recent Street research on Hormel Foods reflects a mixed but generally constructive stance, with valuation expectations resetting slightly lower while earnings and growth projections remain supportive of upside from current levels.

Bullish Takeaways

• Bullish analysts highlight that the updated price target of $27, while a reduction from prior levels, still sits near or above current trading levels, which implies room for multiple expansion as execution improves.
• Model revisions into the upcoming fiscal Q4 report reflect confidence that revenue growth can modestly outpace prior expectations. This supports the use of a higher forward earnings multiple in valuation work.
• Supportive ratings alongside only a modest trim to the target suggest that, despite near term headwinds, the long term earnings power of the portfolio remains intact in analysts' base case scenarios.
• Stronger than previously modeled top line trends provide a buffer for the equity story, as even incremental improvement in volumes and pricing could translate into higher free cash flow over the medium term.

Bearish Takeaways

• Bearish analysts focus on the cut in the price target from $30 to $27 and view it as a signal that valuation must better reflect lingering uncertainty around margin recovery and cost pressures.
• Updated models incorporate a small pullback in forecast profit margins, which reinforces concerns that operating leverage may be slower to materialize than previously expected.
• The reset in target price indicates less room for error on execution. Any disappointment in the fiscal Q4 print or forward guidance is likely to pressure both the earnings outlook and the applied earnings multiple.
• Some see the need for continued operational improvements and clearer visibility on sustainable margin expansion before justifying a return to higher target prices or more aggressive growth assumptions.

What's in the News

• President Trump is expected to sign an order cutting tariffs on key food imports such as beef and coffee, a move that could lower input costs and retail prices for companies including Hormel Foods and major grocery and restaurant chains (Bloomberg).
• Hormel issued new fiscal 2026 guidance, targeting net sales of $12.2 billion to $12.5 billion, GAAP EPS of $1.29 to $1.39, and operating income of $0.96 billion to $1.03 billion, assuming growth across all reporting segments despite a pressured consumer backdrop (company guidance).
• The board approved a 1% increase to the quarterly dividend, lifting the implied annualized rate to $1.17 per share and marking Hormel's 60th consecutive annual dividend increase. The next payout is set for February 17, 2026 to shareholders of record on January 12, 2026 (company announcement).
• Hormel announced a corporate restructuring that will eliminate about 250 corporate and sales roles through a mix of early retirement, closed openings and position reductions. The company expects restructuring charges of $20 million to $25 million, largely recognized in late fiscal 2025 and early fiscal 2026 (company announcement).
• Following the departure of CFO Jacinth Smiley, Hormel appointed longtime finance executive Paul Kuehneman as interim chief financial officer and controller. He will report to interim CEO Jeff Ettinger and oversee accounting, finance, treasury and internal controls (company announcement).

Valuation Changes

• Fair Value Estimate has risen modestly from about $26.69 to approximately $27.25 per share, reflecting a slightly more constructive outlook.
• Discount Rate is essentially unchanged at about 6.96 percent, indicating a stable view of Hormel's risk profile and cost of capital.
• Revenue Growth assumption has increased from roughly 1.78 percent to about 2.18 percent, signaling a modestly stronger top line trajectory.
• Net Profit Margin forecast has fallen from approximately 7.26 percent to about 6.82 percent, incorporating a more conservative view on profitability.
• Future P/E multiple has risen from around 19.5x to roughly 20.8x, implying a slightly higher valuation being applied to forward earnings.