Hormel Earnings: Decent Q1 Driven by Volume Growth, but Turkey Risk Looms in Rest of Fiscal 2024

Narrow-moat Hormel reported a decent start to fiscal 2024 with first-quarter volume growth of 4% year on year. This is particularly notable as most packaged food companies have struggled to recover volumes following inflation-driven price increases during the past year or so. Net sales were up about 1%, which again looks decent against the broader industry backdrop, while the adjusted operating margin held roughly steady at 9.8%. On our initial reaction to the first quarter, we don’t expect to make a material change to either our long-term forecasts (low-single-digit sales growth and 11% adjusted operating margin) or $31 per share fair value estimate. Shares trade slightly above our fair value estimate.