On Wednesday, BofA Securities adjusted its outlook on Hormel Foods Corporation (NYSE:HRL), reducing the price target from $32.00 to $30.00. The firm has decided to maintain an Underperform rating on the stock. The revised price target follows Hormel Foods' third-quarter 2024 financial results, which revealed that while adjusted earnings per share (EPS) met expectations, sales, volumes, and operating income, including margins, fell short. The company's EPS was aided by items not related to regular operations.
Hormel Foods' performance in the third quarter was mixed, with the adjusted EPS of $0.37 aligning with market expectations. Nevertheless, the company has revised its full-year 2024 sales forecast downwards to a range of $11.8 billion to $12.1 billion, a decrease from the previous lower end estimate of $12.2 billion to $12.5 billion.
Additionally, Hormel Foods has narrowed its adjusted EPS projection for the fiscal year to between $1.57 and $1.63, slightly adjusting the prior range of $1.55 to $1.65.
The financial impact of the Planters™ recall has doubled, now expected to decrease EPS by $0.06, up from the previous estimate of a $0.03 detriment. Looking ahead to early 2025, the company anticipates a recovery for Planters™, further progress in its transformation and modernization initiative, and sustained growth in its key retail brands.
However, the ongoing effects of turkey supply dynamics pose uncertainties, particularly concerning the potential recapture of the $0.15 per share headwind experienced in FY24.
In light of these developments, BofA Securities has revised its adjusted EPS forecasts for Hormel Foods for fiscal years 2024 through 2026. The new estimates stand at $1.59, $1.68, and $1.93, respectively, marking a decrease from the previous projections of $1.62, $1.70, and $1.95. The adjustments reflect the latest financial data and the challenges Hormel Foods faces in the near term.
In other recent news, Hormel Foods Corporation reported third-quarter revenue that fell short of expectations, despite surpassing earnings estimates. The company posted adjusted earnings per share of $0.37, slightly above the consensus estimate of $0.36. However, revenue was reported at $2.9 billion, missing analysts' projections of $2.96 billion.
The decline in Hormel's net sales by 2.2% year-over-year was primarily due to lower volumes in its Retail segment and decreases in its International business. The company cited disruptions at its Suffolk, Virginia facility and lower sales of Planters snack nuts as contributing factors.
Analysts from various firms have noted these developments. Looking ahead, Hormel has revised its adjusted earnings guidance for fiscal year 2024 to $1.57-$1.63 per share, and lowered its full-year revenue outlook to $11.8-$12.1 billion.
InvestingPro Insights
As Hormel Foods Corporation (NYSE:HRL) navigates through its fiscal challenges, insights from InvestingPro suggest a mixed financial landscape. With a market capitalization of $16.99 billion and a Price/Earnings (P/E) ratio that stands at 22, the company presents an interesting case for investors. Notably, Hormel has a track record of raising its dividend for 54 consecutive years, illustrating a strong commitment to shareholder returns, even in the face of weak gross profit margins, which currently sit at 16.84%.
InvestingPro Tips highlight Hormel's ability to maintain low price volatility, providing a degree of stability in an investor's portfolio. Additionally, the company's cash flows are robust enough to cover interest payments comfortably, which is reassuring given the moderate level of debt it operates with. For those looking into dividend stocks, Hormel's dividend yield is at 3.41%, complemented by a dividend growth of 2.73% over the last twelve months.
While analysts remain cautious, predicting profitability this year, the InvestingPro Fair Value estimate stands at $39.77, which is higher than the current price, suggesting potential undervaluation. For more detailed analysis and additional InvestingPro Tips, investors can visit https://www.investing.com/pro/HRL, where 9 tips are available to help inform investment decisions.
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