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.

Growth is driven by modernization and innovation in healthier products, aligning with shifts toward protein and wellness, supporting pricing power and sustainable revenue.
Operational efficiencies, global diversification, and disciplined capital allocation provide resilience, underpinning long-term margin expansion and profitability.
Profitability and growth are threatened by volatile input costs, slow pricing reactions, weak demand, shifting consumer trends, and uncertainty in achieving long-term targets.

Catalysts

About Hormel Foods

Develops, processes, and distributes various meat, nuts, and other food products to foodservice, convenience store, and commercial customers in the United States and internationally.What are the underlying business or industry changes driving this perspective?

Hormel's strong positioning in protein-rich food categories and its continued organic sales growth are supported by enduring global shifts toward increased protein consumption and higher demand in emerging markets, which should drive sustainable revenue growth over the long term.
The company's active modernization, innovation, and investment in healthier, leaner, and natural products (e.g., Jennie-O, Applegate, renovation of core brands) aligns with consumers' rising emphasis on health and wellness, helping preserve pricing power and protect or expand net margins in the future.
Major supply chain automation, manufacturing footprint improvements, and the ongoing Transform and Modernize (T&M) initiatives are on track, expected to drive significant operational efficiencies and cost reductions, supporting long-run margin expansion and ultimately higher future earnings.
Strategic pricing actions now being implemented, especially in response to elevated commodity costs, are expected to recover and grow profitability beginning late 2025 and into 2026, which should improve net margins and bottom-line growth as input cost pressures stabilize.
Hormel's diversified global platform (notably robust China and international growth), expanding portfolio in snacks/plant-based protein, and a disciplined capital allocation approach position it to benefit from long-term shifts toward convenience and premium food products, underpinning sustained revenue and mixed improvement in future periods.

Hormel Foods Earnings and Revenue Growth

Hormel Foods Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Hormel Foods's revenue will grow by 2.5% annually over the next 3 years.
Analysts assume that profit margins will increase from 6.3% today to 7.3% in 3 years time.
Analysts expect earnings to reach $952.2 million (and earnings per share of $1.76) by about September 2028, up from $754.5 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.4x on those 2028 earnings, up from 18.6x today. This future PE is greater than the current PE for the US Food industry at 19.5x.
Analysts expect the number of shares outstanding to grow by 0.3% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Hormel Foods Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent and volatile commodity inflation-particularly in pork, beef, and nuts-has resulted in significant margin compression and unpredictable cost swings, which the company expects to continue impacting profitability into fiscal 2026, threatening sustainable earnings growth and margin recovery.
The lag between input cost escalation and the offsetting effect of targeted pricing actions, especially in retail channels where pass-through is slower and price elasticity remains a risk, suggests extended periods where costs may outpace price increases, directly pressuring net margins and earnings.
Hormel's reliance on legacy flagship brands and incremental product renovation faces the risk that evolving consumer preferences toward plant-based, clean-label, and alternative proteins may outpace Hormel's innovation, potentially eroding brand strength, reducing top-line growth, and compressing long-term revenue streams.
Foodservice industry weakness, including sustained soft industry-wide traffic and specific declines in the convenience channel, combined with mixed recovery in international segments (e.g., ongoing profit pressure in Brazil), heightens exposure to slow demand recovery, further risking revenue growth and segment profitability.
The revised 2026 long-term growth targets and profitability objectives, once predicated on more stable input costs and stronger consumer sentiment, are now "under review"; this signals management's lowered confidence in achieving previously outlined earnings, top-line growth, and margin ambitions, pointing to structural risks in delivering long-term financial improvement.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $28.75 for Hormel Foods based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $34.0, and the most bearish reporting a price target of just $25.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $13.0 billion, earnings will come to $952.2 million, and it would be trading on a PE ratio of 20.4x, assuming you use a discount rate of 6.8%.
Given the current share price of $25.52, the analyst price target of $28.75 is 11.2% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Recent Upgrades And Industry Shifts Will Support Longer Term Recovery