McCormick & Company, Incorporated (NYSE:MKC) and Hormel Foods (NYSE:HRL) are both large-cap consumer staples companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, institutional ownership, profitability, dividends, analyst recommendations, risk and valuation.
Risk & Volatility
McCormick & Company, Incorporated has a beta of 0.44, meaning that its share price is 56% less volatile than the S&P 500. Comparatively, Hormel Foods has a beta of -0.06, meaning that its share price is 106% less volatile than the S&P 500.
Dividends
McCormick & Company, Incorporated pays an annual dividend of $1.36 per share and has a dividend yield of 1.6%. Hormel Foods pays an annual dividend of $0.98 per share and has a dividend yield of 2.1%. McCormick & Company, Incorporated pays out 50.9% of its earnings in the form of a dividend. Hormel Foods pays out 59.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Hormel Foods has raised its dividend for 53 consecutive years. Hormel Foods is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Profitability
This table compares McCormick & Company, Incorporated and Hormel Foods' net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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McCormick & Company, Incorporated | 13.75% | 20.93% | 7.24% |
Hormel Foods | 9.45% | 14.55% | 10.04% |
Analyst Ratings
This is a summary of recent ratings and target prices for McCormick & Company, Incorporated and Hormel Foods, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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McCormick & Company, Incorporated | 2 | 4 | 3 | 0 | 2.11 |
Hormel Foods | 1 | 7 | 0 | 0 | 1.88 |
McCormick & Company, Incorporated currently has a consensus price target of $81.5556, indicating a potential downside of 1.62%. Hormel Foods has a consensus price target of $45.8571, indicating a potential downside of 2.35%. Given McCormick & Company, Incorporated's stronger consensus rating and higher possible upside, equities research analysts clearly believe McCormick & Company, Incorporated is more favorable than Hormel Foods.
Valuation & Earnings
This table compares McCormick & Company, Incorporated and Hormel Foods' top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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McCormick & Company, Incorporated | $5.35 billion | 4.14 | $702.70 million | $2.67 | 31.05 |
Hormel Foods | $9.61 billion | 2.64 | $908.08 million | $1.66 | 28.29 |
Hormel Foods has higher revenue and earnings than McCormick & Company, Incorporated. Hormel Foods is trading at a lower price-to-earnings ratio than McCormick & Company, Incorporated, indicating that it is currently the more affordable of the two stocks.
Insider & Institutional Ownership
37.5% of McCormick & Company, Incorporated shares are held by institutional investors. Comparatively, 42.8% of Hormel Foods shares are held by institutional investors. 11.0% of McCormick & Company, Incorporated shares are held by company insiders. Comparatively, 0.8% of Hormel Foods shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.
Summary
McCormick & Company, Incorporated beats Hormel Foods on 11 of the 17 factors compared between the two stocks.