HRL
HRL
Accumulate 2026-03-08
Model
DDM
Price at Report
$24.42
Base IV
$23.15
Bear IV
$20.24
Bull IV
$27.97
Entry Zone: 20-22 · Sell Above: 32
Bore Family Office
Valuation Report — Hormel Foods Corporation (HRL) • March 8, 2026
3-Stage DDM (Ke) • Discount Rate: 7.75% • Current Price: $24.42
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Hormel Foods Corporation, founded in 1891 in Austin, Minnesota, is one of the most recognized consumer branded food companies in the United States. Known for SPAM, Skippy, Planters, Jennie-O, Applegate, and Wholly Guacamole, Hormel operates across three reportable segments. The company is a Dividend King with 59 consecutive years of dividend increases — one of only ~50 companies globally with this distinction. FY2025 was a transition year marked by a $214M non-cash goodwill impairment (Planters, CytoSport), margin compression from elevated input costs, and soft turkey volumes. Management is executing a "Transform and Modernize" initiative targeting $250M in cost savings through FY2026. Net debt of $2.15B is manageable at 2.2× EBITDA.| Business Segment | Revenue | % of Total | YoY Growth | Notes |
|---|---|---|---|---|
| Retail | $7,370M | 61% | -1.8% | SPAM, Skippy, Planters, Applegate |
| Foodservice | $3,850M | 32% | +3.5% | Branded bacon, pepperoni, Jennie-O — strongest performer |
| International | $702M | 6% | +1.2% | China (SPAM), export markets |
📊 Financial Snapshot
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $11,386 | $12,459 | $12,110 | $11,921 | $12,106 |
| EBITDA ($M) | $1,332 | $1,548 | $1,325 | $1,326 | $983 |
| Operating Income ($M) | $1,123 | $1,313 | $1,072 | $1,068 | $719 |
| Net Income ($M) | $909 | $1,000 | $794 | $805 | $478 |
| EPS (diluted) | $1.66 | $1.82 | $1.45 | $1.47 | $0.87 |
| Free Cash Flow ($M) | $770 | $856 | $778 | $1,010 | $534 |
| Annual DPS | $0.980 | $1.040 | $1.100 | $1.130 | $1.160 |
| Total Debt ($M) | $3,324 | $3,299 | $3,309 | $2,859 | $2,857 |
| Rev YoY Growth | — | +9.4% | -2.8% | -1.6% | +1.6% |
📈 DDM Scenarios
$20
🔴 Bear
$23
📊 Base
$28
🚀 Bull
$24.42
Current Price
$27
Analyst Avg PT
📋 Full 10-Year Projection Tables
Bear Scenario
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $1.183 | $1.098 | $1.10 |
| Year 2 | Stage 1 | $1.207 | $1.039 | $2.14 |
| Year 3 | Stage 1 | $1.231 | $0.984 | $3.12 |
| Year 4 | Stage 1 | $1.256 | $0.932 | $4.05 |
| Year 5 | Stage 1 | $1.281 | $0.882 | $4.93 |
| Year 6 | Stage 2 | $1.300 | $0.831 | $5.77 |
| Year 7 | Stage 2 | $1.319 | $0.782 | $6.55 |
| Year 8 | Stage 2 | $1.339 | $0.737 | $7.29 |
| Year 9 | Stage 2 | $1.359 | $0.694 | $7.98 |
| Year 10 | Stage 2 | $1.380 | $0.654 | $8.63 |
| Terminal | — | TV=$24.47 | PV(TV)=$11.60 (57% of IV) |
Base Scenario
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $1.195 | $1.109 | $1.11 |
| Year 2 | Stage 1 | $1.231 | $1.060 | $2.17 |
| Year 3 | Stage 1 | $1.268 | $1.013 | $3.18 |
| Year 4 | Stage 1 | $1.306 | $0.969 | $4.15 |
| Year 5 | Stage 1 | $1.345 | $0.926 | $5.08 |
| Year 6 | Stage 2 | $1.378 | $0.881 | $5.96 |
| Year 7 | Stage 2 | $1.413 | $0.838 | $6.80 |
| Year 8 | Stage 2 | $1.448 | $0.797 | $7.59 |
| Year 9 | Stage 2 | $1.484 | $0.758 | $8.35 |
| Year 10 | Stage 2 | $1.521 | $0.721 | $9.07 |
| Terminal | — | TV=$29.70 | PV(TV)=$14.08 (61% of IV) |
Bull Scenario
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $1.218 | $1.130 | $1.13 |
| Year 2 | Stage 1 | $1.279 | $1.102 | $2.23 |
| Year 3 | Stage 1 | $1.343 | $1.073 | $3.31 |
| Year 4 | Stage 1 | $1.410 | $1.046 | $4.35 |
| Year 5 | Stage 1 | $1.480 | $1.019 | $5.37 |
| Year 6 | Stage 2 | $1.532 | $0.979 | $6.35 |
| Year 7 | Stage 2 | $1.586 | $0.941 | $7.29 |
| Year 8 | Stage 2 | $1.641 | $0.903 | $8.19 |
| Year 9 | Stage 2 | $1.699 | $0.868 | $9.06 |
| Year 10 | Stage 2 | $1.758 | $0.834 | $9.90 |
| Terminal | — | TV=$38.13 | PV(TV)=$18.07 (65% of IV) |
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 5.7% | $31 | $34 | $38 | $43 | $51 |
| 6.2% | $28 | $30 | $33 | $37 | $42 |
| 6.8% | $25 | $26 | $28 | $31 | $34 |
| 7.2% | $23 | $24 | $26 | $28 | $31 |
| 7.7% | $21 | $22 | $23 | $25 | $27 |
| 8.3% | $19 | $20 | $21 | $22 | $24 |
| 8.7% | $18 | $19 | $20 | $21 | $22 |
| 9.2% | $17 | $17 | $18 | $19 | $20 |
| 9.8% | $16 | $16 | $17 | $17 | $18 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Ticker | Company | P/E (fwd) | EV/EBITDA | Div Yield | Div Growth Streak |
|---|---|---|---|---|---|
| HRL | Hormel Foods (current) | 16.4x | 10.5x | 4.7% | 59 yrs |
| GIS | General Mills | 12.8x | 9.8x | 4.2% | 7 yrs |
| CAG | Conagra Brands | 11.5x | 9.2x | 5.8% | Cut 2020 |
| SJM | J.M. Smucker | 9.5x | 8.9x | 4.1% | 26 yrs |
| CPB | Campbell Soup | 11.2x | 9.1x | 3.9% | Cut 2019 |
| KO | Coca-Cola | 22.5x | 17.1x | 3.1% | 62 yrs |
| PEP | PepsiCo | 16.4x | 13.8x | 3.6% | 52 yrs |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $1.160 |
| Current Yield | 4.75% |
| Consecutive Growth Years | 59 |
| 1-yr DPS CAGR | +2.6% |
| 3-yr DPS CAGR | +1.8% |
| 5-yr DPS CAGR | +3.4% |
| 10-yr DPS CAGR | +6.6% |
| Payout Ratio (DPS/EPS) | 133.0% ⚠️ |
| FCF Payout Ratio | 118.5% ⚠️ |
| Sustainability Verdict | Elevated Risk (capex peak year) — Normalizing |
The GAAP payout ratio is distorted by a $214M goodwill impairment in FY2025. Normalized EPS (ex-impairment) is ~$1.26, putting the normalized payout at ~92%. FCF of $534M fell below dividends paid ($633M) in FY2025 — a capex-peak year. FCF coverage is expected to normalize in FY2026 as capex moderates from $311M toward ~$280M and earnings recover toward $1.49/share. With 59 consecutive years of increases, management treats the streak as sacred. A freeze is possible before a cut — but either event would be a major red flag to monitor.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| FY2022 | $1.82 | — | — | — | Actual |
| FY2023 | $1.45 | — | — | — | Actual |
| FY2024 | $1.47 | — | — | — | Actual |
| FY2025 | $0.87 | — | — | — | Actual |
| FY2026E | $1.42 | $1.49 | $1.59 | 13 | Estimate |
| FY2027E | $1.50 | $1.60 | $1.74 | 12 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| FY2022 | $12.5B | — | — | — | Actual |
| FY2023 | $12.1B | — | — | — | Actual |
| FY2024 | $11.9B | — | — | — | Actual |
| FY2025 | $12.1B | — | — | — | Actual |
| FY2026E | $12.0B | $12.4B | $13.0B | 13 | Estimate |
| FY2027E | $12.1B | $12.7B | $13.4B | 12 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $27.33 | Range $26–$30
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Benjamin Theurer | Barclays | Buy | $30 | +22.9% |
| Thomas Palmer | JP Morgan | Buy | $28 | +14.7% |
| Pooran Sharma | Stephens & Co. | Hold | $27 | +10.6% |
| Michael Lavery | Piper Sandler | Hold | $26 | +6.5% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q4 FY2024 | $0.35 vs $0.38 | $-0.03 ❌ | $3.1B vs $3.1B | +$0.0B ✅ | FY2025 $1.58–$1.72 guided |
| Q1 FY2025 | $0.37 vs $0.37 | +$0.00 ✅ | $2.9B vs $3.0B | $-0.0B ❌ | Maintained |
| Q2 FY2025 | $0.37 vs $0.38 | $-0.01 ❌ | $3.0B vs $3.0B | $-0.0B ❌ | Lowered |
| Q4 FY2025 | $0.17 vs $0.28 | $-0.11 ❌ | $3.1B vs $3.1B | $-0.0B ❌ | FY2026 EPS $1.58–$1.72 guided |
(e) Confidence Band Commentary
FY2025 EPS of $0.87 was heavily depressed by a $0.39/share non-cash goodwill impairment charge on the Planters and CytoSport businesses. Underlying normalized EPS was approximately $1.26, suggesting the FY2026 consensus of $1.49 represents ~18% organic growth from normalized earnings — achievable if volume trends improve in both Retail and Foodservice. The Street expects a gradual recovery in margins as input costs (hog, turkey) normalize and pricing holds. The wide EPS range ($1.42–$1.59) reflects genuine uncertainty around turkey market recovery and Planters trajectory.
💡 Investment Thesis
Bull case: Hormel is a classic mean-reversion play at a 15-year valuation low. At $24.42, the stock trades at a ~4.75% dividend yield vs its 5-year average of ~2.2% — indicating profound multiple compression. The impairment charges and margin headwinds are largely behind the company. Foodservice is recovering (+3.5% organic), the Transform & Modernize program is on track for $250M in savings, and turkey market conditions are improving. With 59 consecutive dividend increases and FCF coverage expected to normalize in FY2026, patient income investors are being paid well to wait. A reversion to 3.0% yield (historical norm) implies ~$39/share — 60% upside.
Bear case: Retail segment volume continues to disappoint as private label competition intensifies and the Planters acquisition (2021, $3.35B) fails to deliver. Turkey market recovery is slower than expected. Margin recovery stalls at 6-7% EBIT (vs 10%+ pre-pandemic). Management cuts the dividend growth rate to near-zero to preserve cash — destroying the Dividend King narrative and triggering institutional selling. At a 5.5% yield floor, stock drifts to $21.
Key risk: Payout ratio elevated on normalized earnings (~92%). If FCF recovery stalls in FY2026, the dividend streak becomes the pressure point. Watch Q1 and Q2 FY2026 FCF closely.
⚖️ DDM Verdict: Accumulate — Hormel Foods Corporation (HRL)
Current price: $24.42 | Analyst Avg PT: $27.33
$20
🔴 Bear
$23
📊 Base
$28
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$22 | Begin position |
| Tier 2 — Add | ≤$21 | Add on weakness |
| Tier 3 — Full | ≤$20 | Full allocation |
| Sell Alert | ≥$32 | Above fair value — consider trimming |
HRL is a Dividend King trading at a 15-year valuation low — the yield of 4.75% is more than double its historical average. The FY2025 EPS collapse was largely non-cash (goodwill impairment) and the underlying business is recovering. At $24, downside is limited (book value ~$14, brand portfolio intact, dividend streak at risk only in a severe scenario). Upside to $30–$32 as margins normalize over 18–24 months. This is an accumulate-on-weakness name — start a position here, add below $22, full allocation below $20 if business fundamentals remain intact.
Bore Family Office • Analysis generated by Lurch • Not investment advice.