1-Star Price
PREMIUM
5-Star Price
PREMIUM
Economic Moat
PREMIUM
Capital Allocation
PREMIUM
Despite the very challenging operating environment, we were confident that Hormel’s solid management team would navigate the choppy waters competently, and we were not disappointed. But Hormel’s consistent execution is already priced into the shares, which trade at a 35% premium to our valuation after the 4% pop on the report. As we don’t expect a material change to our $37 fair value estimate, we suggest investors remain on the sideline.
Hormel Foods is a protein-focused branded food company. Its brands include its namesake Hormel, Spam, Jennie-O, Dinty Moore, Applegate, Wholly Guacamole, and Skippy. The vast majority of the company’s revenue is U.S.-based: 64% U.S. retail, 28% U.S. food service, and 8% international. By product type, in fiscal 2021, 23% of revenue was shelf-stable foods, 18% was poultry (branded and commodity), 55% was other perishable food, and 3% was other, primarily nutritional products. The company holds the number-one market position in shelf-stable meat, shelf-stable ready meals, pepperoni, natural/organic deli meat, and guacamole and the number-two position in turkey, bacon, chilled ready meals, and peanut butter.
