S&P Global Cuts Hormel Foods Outlook to Negative on Leverage

S&P Global Ratings revised its outlook on Hormel Foods Corp. (NYSE:HRL) to negative from stable while affirming its 'A-' issuer credit rating and 'A-' issue-level rating on the company's debt. The credit agency pointed to prolonged high leverage and compressed operating margins that have delayed expected balance sheet deleveraging.

S&P Global Ratings-adjusted leverage stood at 1.8x as of July 26, 2026, remaining at or above that threshold for the past year and a half. This elevated leverage follows six consecutive quarters of debt-to-EBITDA metrics approaching 2x, diverging from prior expectations of steady debt reduction.

Margin Contraction and Input Costs

Underpinning the negative outlook is a sustained compression in Hormel's profitability metrics. EBITDA margins have fallen from pre-COVID levels above 14% to under 11% in the 2026 fiscal period.

According to the S&P Global ratings report, these margin pressures stem from rising input costs for raw materials such as pork, beef, and nuts, alongside increased logistics expenses. Operating results have also faced headwinds from localized supply chain bottlenecks and unexpected plant disruption incidents.

Deleveraging Timeline and Cash Flow Deficits

S&P Global forecasts that Hormel's adjusted leverage will hover near 1.8x for fiscal 2026. Modest improvements are projected to reach 1.7x in fiscal 2027 and 1.6x in fiscal 2028.

These updated projections fall short of prior expectations, which anticipated deleveraging down to 1.5x and 1.3x respectively over the same timeframes. Cash generation has faced parallel constraints, with Hormel recording a discretionary cash flow deficit of $55 million in fiscal 2025, while S&P Global projects the deficit will remain below $50 million through fiscal 2026.

What Is at Stake for Corporate Borrowers

Credit rating outlook revisions serve as an early indicator of potential rating changes, which can influence a company's borrowing costs in debt capital markets. For Hormel, maintaining the affirmed 'A-' rating preserves investment-grade access, but the negative outlook signals that rating agency patience is tied to the realization of projected deleveraging and margin recovery over the next several fiscal years.