Hormel Shares Tumble After Q2 Results, Given Numerous Challenges and a Rich Valuation

Heading into Hormel’s April-ended second-quarter earnings report, shares were trading at a significant premium to our valuation, possibly because investors had underestimated risks stemming from events outside of the company’s control, such as herd/flock disease and unpredictable weather, which can result in volatile feed prices. These risks are now impacting Hormel’s fiscal 2022 results, leading to a 5% share price decline. However, we plan to maintain our $37.50 per share fair value estimate for Hormel, as our forecast had anticipated these factors, and we continue to suggest investors wait on the sidelines due to the valuation.