The firm said it lowered its rating on the meat and food products producer based on a valuation call.
"We are downgrading Hormel to "market perform," as our price target does not provide sufficient upside to justify an "outperform" rating," BMO said.
The firm raised its price target on Hormel to $58 from $53, and increased its full year 2014 earnings estimate to $2.21 per share from $2.18 per share.
"We continue to believe that Hormel deserves a premium multiple to its peers, as its balanced portfolio growth opportunities and significant market shares in niche categories create a stronger growth profile with lower earnings variability," the firm added.
Shares of Hormel are lower by 0.55% to $54.23 in pre-market trading this morning.
Separately, TheStreet Ratings team rates HORMEL FOODS CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate HORMEL FOODS CORP (HRL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HRL's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 5.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HRL's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.37, which illustrates the ability to avoid short-term cash problems.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- HORMEL FOODS CORP has improved earnings per share by 21.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HORMEL FOODS CORP increased its bottom line by earning $1.94 versus $1.86 in the prior year. This year, the market expects an improvement in earnings ($2.23 versus $1.94).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Food Products industry average. The net income increased by 21.4% when compared to the same quarter one year prior, going from $113.64 million to $137.98 million.
- You can view the full analysis from the report here: HRL Ratings Report