Hormel Foods (HRL)

Packaged foods company Hormel (NYSE:HRL) missed Wall Street’s revenue expectations in Q4 CY2025 as sales only rose 1.3% year on year to $3.03 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $12.35 billion at the midpoint. Its non-GAAP profit of $0.34 per share was 6.1% above analysts’ consensus estimates.

Company Overview

Best known for its SPAM brand, Hormel (NYSE:HRL) is a packaged foods company with products that span meat, poultry, shelf-stable foods, and spreads.

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Competitors in packaged food with a focus on meat include Kraft Heinz (NASDAQ:KHC), Tyson (NYSE:TSN), and Pilgrim’s Pride (NASDAQ:PPC).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $12.14 billion in revenue over the past 12 months, Hormel Foods is one of the larger consumer staples companies and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because it’s harder to find incremental growth when your existing brands have penetrated most of the market. For Hormel Foods to boost its sales, it likely needs to adjust its prices, launch new offerings, or lean into foreign markets.

As you can see below, Hormel Foods struggled to increase demand as its $12.14 billion of sales for the trailing 12 months was close to its revenue three years ago. This is mainly because consumers bought less of its products - we’ll explore what this means in the "Volume Growth" section.

This quarter, Hormel Foods’s revenue grew by 1.3% year on year to $3.03 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 2.7% over the next 12 months. Although this projection indicates its newer products will spur better top-line performance, it is still below average for the sector.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Hormel Foods’s average quarterly sales volumes have shrunk by 3.4% over the last two years. This decrease isn’t ideal because the quantity demanded for consumer staples products is typically stable.

In Hormel Foods’s Q4 2026, sales volumes dropped 3.9% year on year. This result represents a further deceleration from its historical levels, showing the business is struggling to move its products.

Hormel Foods has bad unit economics for a consumer staples company, signaling it operates in a competitive market and lacks pricing power because its products can be substituted. As you can see below, it averaged a 16.2% gross margin over the last two years. That means Hormel Foods paid its suppliers a lot of money ($83.84 for every $100 in revenue) to run its business.

This quarter, Hormel Foods’s gross profit margin was 15.5%, in line with the same quarter last year. Zooming out, Hormel Foods’s full-year margin has been trending down over the past 12 months, decreasing by 1.1 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Hormel Foods was profitable over the last two years but held back by its large cost base. Its average operating margin of 7.3% was weak for a consumer staples business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Hormel Foods’s operating margin decreased by 2.5 percentage points over the last year. Hormel Foods’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Hormel Foods generated an operating margin profit margin of 8%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Hormel Foods, its EPS declined by 8.8% annually over the last three years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.

In Q4, Hormel Foods reported adjusted EPS of $0.34, in line with the same quarter last year. This print beat analysts’ estimates by 6.1%. Over the next 12 months, Wall Street expects Hormel Foods’s full-year EPS of $1.36 to grow 11.7%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Hormel Foods has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.1% over the last two years, slightly better than the broader consumer staples sector.

Taking a step back, we can see that Hormel Foods’s margin dropped by 2.7 percentage points over the last year. Continued declines could signal it is in the middle of an investment cycle.

Hormel Foods’s free cash flow clocked in at $280.2 million in Q4, equivalent to a 9.3% margin. This result was good as its margin was 1.3 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Hormel Foods historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 8.4%, somewhat low compared to the best consumer staples companies that consistently pump out 20%+.

Hormel Foods reported $901.2 million of cash and $2.86 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.28 billion of EBITDA over the last 12 months, we view Hormel Foods’s 1.5× net-debt-to-EBITDA ratio as safe. We also see its $39.74 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Hormel Foods beat analysts’ gross margin expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, this was a softer quarter. The stock remained flat at $25.38 immediately following the results.

Updated: February 26, 2026 at 6:38 AM EST

Before investing in or passing on Hormel Foods, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Hormel Foods doesn’t pass our quality test. To begin with, its revenue has declined over the last three years. While its favorable brand awareness gives it meaningful influence over consumers’ dining decisions, the downside is its gross margins make it more challenging to reach positive operating profits compared to other consumer staples businesses. On top of that, its declining EPS over the last three years makes it a less attractive asset to the public markets.

Hormel Foods’s P/E ratio based on the next 12 months is 16.7x. At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $27.25 on the company (compared to the current share price of $25.38).