Critical Analysis: J. M. Smucker (NYSE:SJM) and Hormel Foods (NYSE:HRL)

J. M. Smucker (NYSE:SJM) and Hormel Foods (NYSE:HRL) are both large-cap consumer staples companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, dividends, profitability, valuation, risk and earnings.

Volatility & Risk

J. M. Smucker has a beta of 0.27, suggesting that its share price is 73% less volatile than the S&P 500. Comparatively, Hormel Foods has a beta of 0.33, suggesting that its share price is 67% less volatile than the S&P 500.

Insider & Institutional Ownership

81.7% of J. M. Smucker shares are owned by institutional investors. Comparatively, 41.0% of Hormel Foods shares are owned by institutional investors. 2.8% of J. M. Smucker shares are owned by company insiders. Comparatively, 0.6% of Hormel Foods shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares J. M. Smucker and Hormel Foods’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
J. M. Smucker	2.51%	19.85%	6.76%
Hormel Foods	2.82%	9.91%	5.89%

Earnings & Valuation

This table compares J. M. Smucker and Hormel Foods”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
J. M. Smucker	$9.05 billion	1.43	-$138.70 million	$2.14	56.54
Hormel Foods	$12.11 billion	0.93	$478.20 million	$0.63	32.61

Hormel Foods has higher revenue and earnings than J. M. Smucker. Hormel Foods is trading at a lower price-to-earnings ratio than J. M. Smucker, indicating that it is currently the more affordable of the two stocks.

Dividends

J. M. Smucker pays an annual dividend of $4.48 per share and has a dividend yield of 3.7%. Hormel Foods pays an annual dividend of $1.17 per share and has a dividend yield of 5.7%. J. M. Smucker pays out 209.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hormel Foods pays out 185.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. J. M. Smucker has increased its dividend for 27 consecutive years and Hormel Foods has increased its dividend for 60 consecutive years. Hormel Foods is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current ratings and target prices for J. M. Smucker and Hormel Foods, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
J. M. Smucker	0	7	10	0	2.59
Hormel Foods	1	6	2	0	2.11

J. M. Smucker presently has a consensus price target of $136.25, indicating a potential upside of 12.62%. Hormel Foods has a consensus price target of $26.14, indicating a potential upside of 27.25%. Given Hormel Foods’ higher probable upside, analysts clearly believe Hormel Foods is more favorable than J. M. Smucker.

Summary

J. M. Smucker beats Hormel Foods on 9 of the 17 factors compared between the two stocks.

About J. M. Smucker

The J. M. Smucker Company manufactures and markets branded food and beverage products worldwide. It operates in three segments: U.S. Retail Pet Foods, U.S. Retail Coffee, and U.S. Retail Consumer Foods. The company offers mainstream roast, ground, single serve, and premium coffee; peanut butter and specialty spreads; fruit spreads, toppings, and syrups; jelly products; nut mix products; shortening and oils; frozen sandwiches and snacks; pet food and pet snacks; and foodservice hot beverage, foodservice portion control, and flour products, as well as dog and cat food, frozen handheld products, juices and beverages, and baking mixes and ingredients. It provides its products under the Meow Mix, Milk-Bone, Pup-Peroni, Canine Carry Outs, Folgers, Café Bustelo, Dunkin', Folgers, Café Bustelo, 1850, Jif, Smucker's, Smucker's Uncrustables, Robin Hood, and Five Roses. The company sells its products through direct sales and brokers to food retailers, club stores, discount and dollar stores, online retailers, pet specialty stores, natural foods stores and distributors, drug stores, military commissaries, and mass merchandisers. Smucker Company was founded in 1897 and is headquartered in Orrville, Ohio.

About Hormel Foods

Hormel Foods Corporation develops, processes, and distributes various meat, nuts, and other food products to retail, foodservice, deli, and commercial customers in the United States and internationally. It operates through three segments: Retail, Foodservice, and International segments. The company provides various perishable products that include fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamoles, and bacons; and shelf-stable products comprising canned luncheon meats, nut butters, snack nuts, chili, shelf-stable microwaveable meals, hash, stews, tortillas, salsas, tortilla chips, nutritional food supplements, and others. It sells its products under the HORMEL, ALWAYS TENDER, APPLEGATE, AUSTIN BLUES, BACON 1, BLACK LABEL, BREAD READY, BURKE, CAFÉ H, CERATTI, CHI-CHI'S, COLUMBUS, COMPLEATS, CORN NUTS, CURE 81, DAN'S PRIZE, DI LUSSO, DINTY MOORE, DON MIGUEL, DOÑA MARIA, EMBASA, FAST N EASY, FIRE BRAISED, FONTANINI, HAPPY LITTLE PLANTS, HERDEZ, HORMEL GATHERINGS, HORMEL SQUARE TABLE, HORMEL VITAL CUISINE, HOUSE OF TSANG, JENNIE-O, JUSTIN'S, LA VICTORIA, LAYOUT, LLOYD'S, MARY KITCHEN, MR. PEANUT, NATURAL CHOICE, NUT-RITION, OLD SMOKEHOUSE, OVEN READY, PILLOW PACK, PLANTERS, ROSA GRANDE, SADLER'S SMOKEHOUSE, SKIPPY, SPAM, SPECIAL RECIPE, THICK & EASY, VALLEY FRESH, AND WHOLLY brands through sales personnel, independent brokers, and distributors. The company was formerly known as Geo. A. Hormel & Company and changed its name to Hormel Foods Corporation in January 1995. Hormel Foods Corporation was founded in 1891 and is headquartered in Austin, Minnesota.