HRL: Bearish Technicals Signal Potential Put Play

Hormel Foods Corporation is a global branded food company, operating through three segments: Retail, Foodservice, and International. The company processes, markets, and sells a wide range of food products, including meat, nuts, and other food items. Its products are distributed through various channels, including U.S. retail, U.S. foodservice, and international markets. The Retail segment includes the 'MegaMex Foods, LLC' joint venture. Hormel differentiates itself through a focus on branded, value-added consumer items, a dedicated sales force, and a commitment to innovation and quality. The company utilizes a balanced approach to sourcing raw materials, including pork, turkey, beef, chicken, and nuts, and employs hedging strategies to manage input cost risks. Key brands include 'HORMEL', 'JENNIE-O', 'SPAM', and 'PLANTERS'.

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HRL's technical outlook is decidedly bearish. The stock is currently trading at $21.575, significantly below its 50-day SMA of $26.54 and 200-day SMA (where available) suggesting a strong downtrend. The EMA_21 at $23.27 further confirms the downward momentum. Momentum indicators paint a grim picture; the RSI_14 is at a low 23.63, indicating oversold conditions, but this can persist in a strong downtrend. The MACD at -0.81 is well below its signal line, and the MACDh is negative, reinforcing the bearish signal. Furthermore, the ADX_14 at 46.11 indicates a strong trend, which in this case is downwards. Stochastic Oscillator values (%K at 10.54 and %D at 10.37) are also very low, but not yet showing signs of divergence. The recent price action confirms the downtrend, with a series of lower highs and lower lows. The ROC_20 at -11.64% indicates significant underperformance over the past 20 days. With the price near its 52-week low ($21.03), a further breakdown could lead to accelerated losses. Given these factors, a bearish outlook is warranted for HRL over the next 1-3 months.

Hormel Foods' MD&A presents a slightly positive but cautious outlook. `Net sales` for the third quarter of fiscal 2025 increased by 4.6% to $3,032.876 million compared to $2,898.443 million in the prior year, driven by growth across all segments. However, the `Gross Profit` margin declined from 16.8% to 16.1% for the same period, indicating cost pressures. For the first nine months of fiscal 2025, `Net cash provided by operating activities` decreased significantly by 39% to $522 million, compared to $858.117 million in the prior year, primarily due to a planned inventory build and elevated commodity market prices. Looking ahead to the fourth quarter of fiscal 2025, the company expects 'net sales growth from each of its segments' but anticipates 'gross profit as a percent of net sales to decrease' compared to the previous year. This suggests continued top-line growth, but profitability concerns remain due to higher input costs and margin pressures, particularly in the Foodservice and International segments. The company's continued focus on its 'Transform and Modernize (T&M) initiative' aims to address some of these cost pressures, but the impact is yet to fully materialize.

The Hormel Foods earnings call reveals a mildly bearish sentiment, primarily driven by unexpected commodity cost surges that impacted profitability. While organic net sales increased by 6%, driven by all three segments, this top-line growth 'did not translate into the bottom-line growth we expected,' according to Jeff Ettinger. The company is taking 'targeted pricing actions' to address commodity inflation, but expects profit recovery to lag into next year. Jacinth Smiley noted that 'commodity markets worsened significantly beyond our projections,' with pork bellies up approximately 30%. Although the Transform and Modernize initiative is delivering benefits, the company is not providing fiscal 2026 guidance at this time, citing that previous growth goals were based on assumptions that have not been realized, including a more stable input cost environment and stronger consumer sentiment. Management is focused on returning to profitable growth and emphasizes that their long-term growth algorithm is a better metric to use when considering go-forward results.

HRL's financial performance presents a mixed picture. Revenue decreased slightly from $3.198B in Q4 2023 to $3.033B in Q3 2025, indicating a minor slowdown in sales. The gross profit ratio has remained relatively stable, fluctuating between 0.159 and 0.174, with the latest quarter at 0.161, suggesting consistent cost management relative to revenue. Operating cash flow has been volatile, with a high of $408.6M in Q4 2024, but dropping to $156.7M in the most recent quarter, indicating potential challenges in maintaining cash generation. Total debt has decreased from $3.311B in Q1 2024 to $2.857B in Q2 2025, and further to $0 in Q3 2025, which is a significant positive, suggesting improved solvency and reduced financial risk. Overall, while revenue growth is stagnant and operating cash flow is variable, the company's debt management is a strong point, contributing to a moderately stable outlook.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.