HORMEL FOODS CORPORATION (HRL): what the price requires

The current priced-in claim for HORMEL FOODS CORPORATION (HRL) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/HRL

Headline

FieldValue
TickerHRL
CompanyHORMEL FOODS CORPORATION
Current price$24.40/sh
CompositionPerishable 73% / Shelf-stable 27%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin today8.0%
Multiple paid15x operating income

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 6.7% cost of capital with 4% terminal growth over a 5-year stage.

Reconcile: at the x-ray's 9.3% required return this reads ~8.2%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.56σ
cohort percentile (of 69 peers)32
implied end-window share0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset3.45x5expensive
Earnings2.53x4expensive
Relative1.33x3expensive
Growth1.20x5expensive

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.7%); the inversion above states its own rate.

Per-Model Detail (n=17)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$20.291.20xyesFCF base $0.7B, growth 2% (input: historical growth), terminal g 2.5%, WACC 7.7%, 5yr projection
DCF Exit MultipleGrowth$22.861.07xyesExit EV/EBITDA: 16.4x / 18.4x / 20.4x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$18.381.33xyesP/E 22x (static sector reference · 2026-04), scenarios: 18.5x / 22.0x / 25.5x (bear / base = reference held flat / bull), EV/EBITDA 14x
Simple DDMGrowth$36.640.67xyesDPS $1.17, g=5.9% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3%
Two-Stage DDMGrowth$3.766.49xyesStage 1: -32% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$9.162.66xyesBV/sh $14.43, ROE (TTM) 5.9%, ke 9.3%
Two-Stage Excess ReturnAsset$7.083.45xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$17.151.42xyesRev $12.2B, growth 2% (input: historical growth; tapered), Terminal P/S: 0.9x / 1.1x / 1.3x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$15.011.63xyesNormalized EBIT (5y avg op income, one-time charges added back) $1.04B × (1−24%) / WACC 7.7% → EPV (no growth)
Residual IncomeAsset$6.823.58xyesBV $14.43 + 5yr PV of (ROE (TTM) 5.9% − Kₑ 9.3%) × BV; BV grows 3.8%/yr
Graham NumberAsset$16.611.47xyes√(22.5 × EPS $0.85 × BVPS $14.43) — Graham's conservative floor
EV/EBITDA RelativeRelative$17.631.38xyesEBITDA $0.84B × sector EV/EBITDA 14.0x
FCF YieldEarnings$9.912.46xyesFCF $692.9M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$9.412.59xyesSBC-adj FCF $0.67B (FCF $0.69B − SBC $0.03B) capitalized at Kₑ
Ben Graham FormulaEarnings$0.7134.37xyesEPS $0.85 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset$3.117.85xyesBV $14.43 × (ROIC 1.7% / WACC 7.7%)
P/Sales SectorRelative$44.360.55xyesRevenue $12.22B × sector P/S 2.0x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$9.192.66xyesEPS $0.85 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$2.0b
Net debt / NOPAT (after-tax)2.79x
Net debt / operating income (pre-tax)2.13x
Interest coverage12.1x
Share count CAGR (dilution)0.0%
Burning cashno

Bullet Takeaways

Bull Case

What the static valuation methods miss about Hormel is the thing that does not appear on a single year's income statement: the durability of demand for the brands. The asset-value, earnings-power, and peer-multiple lenses all read today's depressed earnings and call the stock richly valued. Only the dividend-and-growth methods reach the price, because only they price the idea that this revenue stream persists and compounds. Fifty-nine straight years of dividend increases is not a marketing line; it is the longest possible audit trail that the cash has shown up, year after year, through recessions and commodity spikes alike. The current trailing year understates the business, and the bull case starts by refusing to extrapolate a weak year forever.

The recovery lever is concrete and management-controlled. The Transform and Modernize program, launched in 2024, is a multiyear effort to streamline costs, optimize the portfolio, and fix the supply chain, with a stated goal of adding about $250 million to operating income in fiscal 2026. Early reads point the right way: turkey-network improvements and lower SG&A drove margin expansion across Retail and Foodservice in the second quarter, and the company reaffirmed full-year fiscal 2026 sales guidance of $12.2 billion to $12.5 billion. The 10-K frames fiscal 2026 around "net sales growth, which assumes growth across a broad range of categories, increased brand support and innovation", which is the company telling you where it expects the recovery to come from.

The portfolio itself is the moat, and it is being actively reshaped rather than left to drift. Hormel retained the JENNIE-O brand and its value-added turkey products while divesting the commodity whole-bird turkey operation to Life-Science Innovations in April 2026, a clean example of trimming the low-margin commodity exposure and keeping the branded, higher-margin pieces. Priority brands including Jennie-O ground turkey and Planters snack nuts posted year-over-year sales growth in the second quarter. A business that can prune its own commodity tail while its branded core grows is doing exactly what a packaged-food compounder is supposed to do.

Bear Case

The bear case is easiest to see in how the valuation methods disagree, and the disagreement is lopsided. On book value plus profitability, on capitalized current earnings, and on peer multiples, today's price sits above where each method lands; the asset-value and earnings-power lenses both read the stock as richly valued on what it currently earns. Only the dividend and growth-DCF methods reach the price, and they reach it by assuming the cash flow compounds durably from here. The conservative methods are usually the more honest read in a turnaround, because they price what the company is earning now rather than what it hopes to earn after a multiyear program lands. Earnings per share of about $0.85 on the trailing basis is a thin foundation for a price that the static frames already call full.

That thin earnings base collides directly with the dividend record the bull case leans on. Fifty-nine years of increases is a powerful signal, but it has pushed the payout ratio uncomfortably high relative to current earnings, which means the dividend now depends on the Transform and Modernize recovery actually delivering. If operating income does not climb back toward the targeted level, the company faces the choice the aristocrats dread: stretch the balance sheet to protect the streak, or break it. Net debt sits near $2.0 billion against trailing operating income, a manageable load while interest coverage holds near nine times, but not a balance sheet with room to fund a shortfall indefinitely.

The operating risks that caused the weak year have not gone away. The company is exposed to "commodity price risk through grain, lean hog, natural gas, and diesel fuel markets", the kind of input volatility that can swallow a margin program's gains in a single bad protein cycle. Demand sits with a concentrated customer base: the top five customers were roughly 38% of gross sales in fiscal 2025, with Walmart a customer across both the Retail and International segments. And the brand-trust risk is real and recent, with a class 1 chicken recall in foodservice in the fourth quarter of fiscal 2025 and a Planters recall the year before. None of these is fatal; together they explain why the conservative methods refuse to credit the recovery before it shows up in the numbers.

Valuation

Today's price works out to roughly 15 times company-wide operating income, and the more interesting fact is which direction that points. On the company's own operating-profit base, the multiple is low enough that the price sits below what even a modest annual decline in operating profit would warrant. That is a value-and-recovery read, not a growth premium: the market is paying a price that builds in continued weakness, and the question is whether the Transform and Modernize program reverses it. Read the implied figure as a bound rather than a measurement, because the inversion runs on a normalized operating-income basis that differs from the depressed trailing year.

The disagreement among the methods sharpens the picture. Hormel is unusual in that nearly every static lens calls it richly valued on what it earns today, while the dividend and growth methods reach the price. The peer-multiple lens marks it near a 22 times sector P/E and a 14 times sector EV/EBITDA, both above where the depressed trailing earnings justify; the book-value-plus-profitability methods land well below the price because trailing return on equity, near 6%, sits under the cost of equity. Only by crediting the dividend stream and a recovery in operating profit do the forward methods catch up to today's level. The pattern says the price is a bet on durable compounding that the static frames structurally cannot capture from a single weak year, which is precisely the bet a recovering aristocrat asks you to make.

The balance sheet can carry the wait, within limits. Net debt of about $2.0 billion against trailing operating income leaves leverage under three times pre-tax operating income, with interest coverage near nine times and a share count that has held flat rather than ballooned. There is no cash burn here; the issue is not solvency but the squeeze between a high payout ratio and depressed earnings. The valuation rests on a single hinge: the roughly $250 million operating-income recovery the company is targeting for fiscal 2026 either arrives, in which case the conservative methods reprice upward, or it does not, in which case the dividend math gets tight. That hinge, not any one multiple, is the decision.

Catalysts

The most direct catalyst is the Transform and Modernize program converting into reported operating income. Management has framed it as a multiyear effort to streamline costs, optimize the portfolio, and improve the supply chain, with a goal of adding roughly $250 million to operating income in fiscal 2026. The second-quarter print already showed turkey-network improvements and lower SG&A driving margin expansion across Retail and Foodservice, so the read on each subsequent quarter is whether that margin trajectory holds and compounds toward the target.

Portfolio reshaping is the other live thread. Hormel completed the divestiture of its commodity whole-bird turkey business to Life-Science Innovations on April 24, 2026, while retaining the branded JENNIE-O turkey products, a move that should lift the segment's margin mix going forward. The company reaffirmed full-year fiscal 2026 sales guidance of $12.2 billion to $12.5 billion and pointed adjusted earnings toward the upper half of its range. The protein cycle is the wildcard underneath all of it: grain, hog, and energy costs can compress margins faster than the cost program expands them, so the next earnings call's commentary on input costs is the read that matters most for the recovery's pace.

Peer Cohorts (Per Segment, With Filing Citations)

Retail (reported)

Foodservice (reported)

Core business (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

company FY2025 10-K · Q1 FY2026 earnings release · Q2 FY2026 earnings release · company press release, April 2026 · company earnings materials, fiscal 2026

View the full interactive HRL report on boothcheck