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Hormel Foods Updates 1 Key Risk Factor
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Hormel Foods Updates 1 Key Risk Factor

Global food company Hormel Foods Corp. (HRL) recently delivered a better-than-expected performance for the fourth quarter on both its top-line and bottom-line fronts.

Driven by double-digit growth across all of its business segments and channels, coupled with an increase in production throughput, Hormel increased Q4 revenue 42.7% year-over-year to $3.45 billion. The figure was ahead of analysts’ estimates by $232.3 million.

Furthermore, margin gains across all business segments, pricing actions, and a better profitable mix helped Hormel post earnings per share of $0.51, beating consensus estimates by $0.01. HRL posted earnings per share of $0.43 in the comparable year-ago period.

With these developments in mind, let us take a look at the changes in Hormel’s key risk factors that investors should know.

Risk Factors

According to the TipRanks Risk Factors tool, Hormel’s top two risk categories are Production and Macro & Political, contributing 27% each to the total 15 risks identified. In its recent annual report, the company has added one key risk factor under the Production risk category.

Hormel highlighted that its performance hinges on the cost and supply of inputs such as pork, poultry, beef, feed grains, nuts, and energy. Higher costs, gyrations in commodity prices, and availability of raw materials and other inputs may adversely affect Hormel’s bottom line. (See Insiders’ Hot Stocks on TipRanks)

To limit this risk, Hormel has roped in multiple long-term suppliers. However, factors such as international trade barriers, other restrictions, or business disruptions could negatively affect the company.

Compared to a sector average of 17%, Hormel’s Production risk factor is at 27%.

Wall Street’s Take

On December 10, Piper Sandler analyst Michael Lavery increased the price target on the stock to $49 from $45 (6.5% upside potential).

Consensus on the Street is a Hold based on 4 unanimous Holds for the stock. The average Hormel Foods price target of $47 implies the stock is fairly priced at current levels. That’s after a near 6% gain in Hormel’s share price over the past month.

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