Inside Hormel Foods’ Risk Factors

Hormel Foods (HRL) is an American multinational food processing company. It makes meat and poultry products as well as prepared foods. Hormel sells its products through retailers and food service providers.

For Fiscal Q1 2022 ended January 30, Hormel reported a 24% year-over-year rise in revenue to $3 billion and surpassed the consensus estimate of $2.9 billion. It posted adjusted EPS of $0.44, which rose from $0.41 in the same quarter the previous year but missed the consensus estimate of $0.45.

Hormel ended the quarter with $824.4 million in cash. The company recently distributed a quarterly dividend of $0.26 per share. Hormel stock currently offers a dividend yield of 1.98%, compared to the sector average of 1.5%.

With this in mind, we used TipRanks to take a look at the risk factors for Hormel Foods.

Risk Factors

According to the new TipRanks Risk Factors tool, Hormel Foods’ top risk categories are Production and Macro and Political, each with 4 of the total 15 risks identified for the stock. Legal and Regulatory and Ability to Sell are the next two major risk categories with 3 and 2 risks, respectively. Here are the takeaways from Hormel Foods’ risk profile.

The company tells investors that it is undergoing a digital transformation project dubbed Project Orion. It expects the project to deliver improvements in analytics, customer service, and process efficiencies. The Orion project is rolling out in multiple phases, with human resource and financial processes already deployed. However, the company cautions that the remaining phases to be implemented may prove to be more costly and difficult than anticipated. Moreover, the company says that there is no guarantee that the Orion project will deliver the expected benefits.

Hormel Foods informs investors that it is subject to complex and stringent regulations. It mentions regulations on its manufacturing facilities and the impact of its operations on the environment. It warns that failure to comply with the regulations could expose it to penalties and lawsuits. Moreover, the company cautions that it could incur additional expenses as a result of the changing regulations.

Analysts’ Take

Piper Sandler analyst Michael Lavery recently maintained a Hold rating on Hormel Foods stock and raised the price target to $49 from $48. Lavery’s new price target suggests 2.93% downside potential.

Consensus among analysts is a Hold based on 1 Buy and 6 Holds. The average Hormel Foods price target of $49.67 implies 1.60% downside potential from current levels.

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