On Thursday, Piper Sandler reiterated its Neutral stance on Hormel Foods (NYSE:NYSE:HRL) shares, maintaining the $33.00 price target for the company's stock.
According to InvestingPro data, the stock currently trades at $31.99 and appears undervalued based on its Fair Value analysis. The company maintains a solid financial foundation with a "Good" overall health score and has notably maintained dividend payments for 54 consecutive years.
The firm's analyst highlighted Hormel Foods' financial targets presented during its 2023 investor day, noting the substantial role of the company's T&M savings initiatives. These initiatives are expected to contribute approximately $200 million in net EBIT growth over a three-year period.
The analyst pointed out that while Hormel Foods has set a net EBIT growth goal of around $250 million, the total gross savings from the T&M initiatives have not been disclosed. This lack of clarity makes it challenging for investors to predict the potential level of gross savings. Despite this uncertainty, there is an anticipation that the momentum of savings could increase.
Hormel Foods is also seeing a production increase for its Planters brand, with expectations set for improved performance starting in the second fiscal quarter of 2025 (F2Q25). In light of these developments, Piper Sandler has adjusted its earnings per share estimates for Hormel Foods, lowering the forecast for fiscal year 2025 (F25E) from $1.69 to $1.64, while the estimate for fiscal year 2026 (F26E) stands at $1.91.
The confirmation of the $33 price target comes as the firm evaluates Hormel Foods' strategies and potential for cost savings. The company's efforts to ramp up production and enhance its performance in the coming fiscal quarters are key factors taken into account in maintaining the current stock valuation.
While the company faces challenges with its gross profit margin of 16.86%, InvestingPro subscribers can access over 30 additional financial metrics and insights in the comprehensive Pro Research Report, helping investors make more informed decisions about Hormel's future prospects.
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