Majority consensus rates HRL as “hold”
The majority of analysts maintain a “hold” rating for Hormel Foods (HRL). As of December 17, of the 12 analysts covering the stock, 75.0% rated it as a “hold.” Another 17% rated it as a “sell,” and the remaining 8% gave it a “buy” rating.
There has been no price revision activity for Hormel Foods in December so far. Currently, analysts’ 12-month average target price for HRL stock is $39.42, reflecting an 8.7% downside to the stock price as of December 17.
In comparison, analysts are bullish on Tyson Foods (TSN) and ConAgra (CAG) and are on the sidelines about Pilgrims’ Pride (PPC). Of the 16 analysts covering Tyson Foods, 56% recommend a “buy,” and another 38% recommend a “buy.” On December 11, J.P. Morgan reinstated TSN with a “neutral” rating target price of $60.00. Their target price of $69.60 reflects a 30.2% upside based on the stock’s December 17 price.
Of the 11 analysts covering ConAgra, 91.0% recommend a “buy,” and the remaining recommended a “hold.” On December 17, J.P. Morgan slashed its price target on CAG to $36.00 from $42.00. Their mean target price is $39.92, which implies a 37.6% upside. For Pilgrims Pride stock, of the eight analysts, 38% recommend a “buy,” and the rest of the analysts recommended a “hold.” PPC’s mean target price is $22.33, which indicates a 37.7% upside.
Forward PE valuations
As of December 17, Hormel Foods was trading at a 12-month forward PE multiple of 23.5x. In contrast, Tyson Foods is trading at a 12-month forward PE multiple of 8.9x, while Pilgrims’ Pride and Sanderson Farms are trading at 12-month forward PE multiples of 9.1x and 51.1x, respectively. However, ConAgra’s PE multiple is 12.7x as of December 17.
For fiscal 2019, analysts expect Hormel Foods’ adjusted EPS to decline 3.2% to $1.83. Higher costs are likely to prove a drag on the bottom line, offsetting the benefit from lower taxes.
Similarly, for fiscal 2019, Tyson Foods’ adjusted EPS is expected to be down 3.4% to $5.95. For ConAgra, the consensus estimates for fiscal 2019 adjusted EPS stand at $2.12, marginally up from $2.11 reported in fiscal 2018.
For fiscal 2018, Pilgrims’ Pride is expected to report adjusted EPS of $1.47, representing a decline of 49.1% on a YoY basis. For fiscal 2019, adjusted EPS is expected to increase by 22.4% to $1.80.