Hormel Foods (HRL) Valuation After Earnings Downgrade and Strong Sell Analyst Signal

Hormel Foods (HRL) just landed on the Zacks Rank #5 (Strong Sell) list after analysts revised their earnings expectations for the year downward by 7.5% over the past two months. For investors, this kind of earnings outlook can be a serious signal. Even with the company announcing a standard dividend and debuting some new PLANTERS® products on shelves, these developments have not seemed to outweigh concerns about profit growth. Zooming out, Hormel’s stock story over the past year has been a grind. Recent months show weakness, with both the past quarter and annual returns running deep in the red, while longer-term performance remains firmly negative. There have been a few bright spots, such as continued product innovation and steady dividend payouts, but so far, momentum has not shifted in the company’s favor. After all these developments, the question for anyone following Hormel right now is clear: is the market punishing the stock too harshly, or are investors right to doubt its near-term growth story?

Most Popular Narrative: 14% Undervalued

According to the most widely followed narrative, Hormel Foods shares are currently undervalued by 14% compared to their estimated fair value. This view is based on a detailed consensus about the company's future earnings prospects, margin improvement, and expected progress in operational efficiency.

“Major supply chain automation, manufacturing footprint improvements, and the ongoing Transform and Modernize (T&M) initiatives are on track. These are expected to drive significant operational efficiencies and cost reductions, supporting long-run margin expansion and ultimately higher future earnings.”

Curious how much margin expansion and earnings growth could mean for Hormel’s future share price? The consensus is betting on a long-term turnaround built on operational discipline, innovation, and bold assumptions about profit improvement. Want to know which key financial levers are baked into this valuation and just how optimistic those projections really are? Dig into the narrative’s numbers to see what could power HRL’s next chapter.

Result: Fair Value of $28.75 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent commodity cost swings and slower pricing reactions could undermine Hormel's outlook. These factors act as real challenges to the optimistic turnaround narrative.

Find out about the key risks to this Hormel Foods narrative.

Another View: Discounted Cash Flow Perspective

A second angle on Hormel’s valuation comes from our SWS DCF model, which also suggests the shares may be undervalued. However, as with any model, results depend on the assumptions built in. What would you trust more: the analysts’ consensus or a cash flow-based deep dive?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Hormel Foods for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Hormel Foods Narrative

If you think there’s a different story to tell or want to dig into the numbers yourself, jump in and build your own perspective in just a few minutes. Do it your way

A great starting point for your Hormel Foods research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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