UPDATE: Credit Suisse Downgrades Hormel Foods Corp. to Neutral, Raises PT on Valuation

In a report published Wednesday, Credit Suisse analyst Robert Moskow downgraded the rating on

from Outperform to Neutral, but raised the price target from $49.00 to $50.00. In the report, Credit Suisse noted, “We are downgrading our recommendation for Hormel to Neutral primarily on valuation. At over 11x CY15 EBITDA, the stock is trading in line with large-cap packaged food companies and at a 3% premium to smid-cap food producers. While we are increasing our estimates and TP to reflect the CytoSport acquisition, we harbor concerns around the strategic rationale. We believe this deal raises questions about the M&A discipline that has historically been such a strong part of our investment thesis. We estimate Hormel paid 15x EBITDA for this business, which is a large premium given sales growth has stagnated. We also think it will be challenging for Hormel to stimulate growth since the company does not have much knowledge or experience of this category or core consumer. A $450M acquisition in the context of a $13B market cap company is not a big deal, but we still find it difficult to embrace. Our $50 TP is based on 11x our one-year forward EBITDA.” Hormel Foods Corp. closed on Tuesday at $49.19.