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Hormel Foods Corp

HRL
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Hormel Foods Corp AI Insights

Informational only. Not investment advice.
As of 2025-12-08

Snapshot

  • Goodwill of 4.9B is 61% of equity (8.1B) - impairment risk if brands underperform vs acquisition prices[Goodwill]
  • EPS declining -6.2% 3Y CAGR while paying 84% of earnings as dividends (1.15/share vs 1.37 EPS TTM)[EPS Growth 3Y]
  • Gross margin 16.3% TTM vs industry median 29.7% - commodity cost pressure squeezing profitability[Gross Margin TTM]

Watch Triggers

  • Gross Margin TTM: Falls below 15% — Would signal commodity costs overwhelming pricing power, threatening dividend sustainability
  • Goodwill: Any impairment charge announced — 4.9B goodwill is 3.4x tangible book - impairment would devastate equity base
  • Free Cash Flow TTM: Drops below 550M — Current 628M barely covers 635M dividend - any decline forces cut or debt funding

Bull Case

Dividend aristocrat with 69% avg 5Y payout ratio and 1.15/share yield provides defensive income; FCF of 628M TTM covers dividend with modest cushion

Dividends Paid Per Share TTMFree Cash Flow TTMDividend Payout Ratio Avg 5Y

Operating margin 7.9% TTM exceeds industry median 5.2% despite gross margin weakness - demonstrates cost discipline and operational efficiency

Operating Margin TTMOperating Income TTM

Bear Case

Tangible book value only 1.4B vs 13.1B market cap (P/TBV of 9.1x) - paying massive premium for intangibles that may not hold value

Tangible Book ValueP/B RatioGoodwill

Negative EPS growth (-6.2% 3Y, -2.3% 5Y) with inventory at 1.8B (55% of current assets) signals demand weakness and working capital drag

EPS Growth 3YEPS Growth 5YInventory

Bull vs Bear Balance

AI-generated sentiment analysis based on fundamental metrics and market conditions.

BearBull
40%

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Forward Thesis

Margin compression likely to persist as commodity costs remain elevated and pricing power limited

1-3ymed
  • Gross margin 45% below industry median
  • EPS negative growth 5Y (-2.3% CAGR)
  • High dividend payout constrains reinvestment
Gross margin 16.3% vs 29.7% medianFCF 628M supports 635M dividend but leaves little bufferOperating margin 7.9% vs 5.2% median - only bright spot
Valuation Context
Caveats

Public Strategies Rankings

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Fundamental company data provided by Morningstar, updated daily.

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