Hormel Stock Near Lows, But Tariff Relief Could Boost Outlook

Hormel Foods (HRL) reported mixed Q2 2025 results, with revenue slightly missing expectations at $2.90 billion versus $2.92 billion expected, while adjusted EPS of 35 cents met estimates; the stock subsequently fell 2.8%. While revenue was up slightly year-over-year, EPS declined approximately 10% due to tariff pressures impacting imported ingredients and a beef stew recall. Despite these headwinds and executive changes, Hormel maintained its full-year guidance and analysts have upgraded the stock, potentially due to its attractive valuation near 10-year lows and a forward P/E ratio of around 18x, a slight discount to its historical average and the consumer staples sector.

Analysis

Hormel Foods Corp. (HRL) reported mixed second-quarter 2025 results, with revenue of $2.90 billion slightly missing the $2.92 billion consensus but showing a marginal year-over-year increase from $2.89 billion. While adjusted earnings per share (EPS) of 35 cents met expectations, this represented an approximate 10% decline year-over-year, primarily attributed to tariff-related "supply chain issues" impacting imported ingredients for key products and affecting profitability in its Foodservice and International segments, despite growth in the Retail sector. The company also navigated a beef stew recall and announced an upcoming transition in its Chief Marketing Officer role. Notwithstanding these challenges, Hormel maintained its full-year guidance for net sales between $12 and $12.2 billion and adjusted EPS between $1.58 and $1.68, although the higher end of the EPS range was slightly reduced from $1.72. Management indicated that the worst of the tariff impacts might be past, with potential further relief from a recent court ruling against Trump-era tariffs, though its final impact remains uncertain. Despite the stock declining 2.8% post-earnings, and being down 4.4% year-to-date and over 12% in the last 12 months, analysts have recently upgraded HRL, likely influenced by its valuation near 10-year lows and a forward price-to-earnings ratio of approximately 18x, a slight discount to its historical levels and the consumer staples sector.

Key Decisions for Investors

• Investors should carefully evaluate the ongoing impact of tariff-related cost pressures and operational challenges on Hormel's profitability against its maintained full-year guidance and management's cautiously optimistic outlook on supply chain issues.
• The stock's current valuation, trading near 10-year lows with a forward P/E around 18x, alongside recent analyst upgrades, may signal a potential value opportunity for investors tolerant of near-term uncertainties and with a longer-term perspective.
• Key areas to monitor include the evolution of trade policies affecting input costs, the company's success in mitigating these pressures, the impact of the beef stew recall on brand perception, and the strategic direction under new marketing leadership.