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Highlights:
Hormel Foods has underperformed the broader market with stock prices declining 8.4% YTD and 9.6% over the past year.
The company reported a 2.2% drop in net sales for Q3, primarily due to soft consumer demand and declining volumes in its Retail and International segments.
Analysts have issued mixed ratings, with a consensus "Hold" and a recent "Underperform" initiation by Exane BNP Paribas.
Hormel Foods Corporation (NYSE:HRL), the Minnesota-based food manufacturer, has faced a challenging year, with its stock underperforming both the broader market and sector-specific benchmarks. Over the past 12 months, Hormel's stock has dropped 9.6%, significantly trailing the S&P 500's 30.6% return. This poor performance continued into 2024, with an 8.4% decline year-to-date, even as the First Trust Nasdaq Food & Beverage ETF dipped only 2.1% during the same period.
Several factors have contributed to Hormel's struggles. The company has been dealing with reduced consumer demand, especially in its Retail and International segments. In Q3 2024, the Retail segment saw a 9.1% volume drop, and the International segment experienced a 13.3% decline. Additionally, Hormel's turkey business continues to face challenges due to lower prices for whole-bird products and rising operational costs, which have put pressure on margins.
As a result of these headwinds, Hormel revised its full-year net sales forecast to between $11.8 billion and $12.1 billion, which contributed to a decline in investor confidence. The company's net sales for the quarter fell 2.2% year-over-year, coming in at $2.9 billion. Adjusted earnings per share (EPS) also declined by 7.5% year-over-year to $0.37, though the figure exceeded analysts’ expectations by 2.8%.
Hormel's mixed earnings surprise history has led to a “Hold” consensus from analysts, with one analyst recently initiating an “Underperform” rating. While there is a slight upside potential based on analysts' price targets, the stock’s recent underperformance raises concerns about its near-term recovery trajectory.
