Head-To-Head Analysis: Leucadia National (LUK) and Hormel (HRL)

Leucadia National (NYSE: LUK) and Hormel (NYSE:HRL) are both multi-sector conglomerates companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.

Risk and Volatility

Leucadia National has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500. Comparatively, Hormel has a beta of 0.44, suggesting that its stock price is 56% less volatile than the S&P 500.

Dividends

Leucadia National pays an annual dividend of $0.40 per share and has a dividend yield of 1.7%. Hormel pays an annual dividend of $0.75 per share and has a dividend yield of 2.1%. Leucadia National pays out 24.2% of its earnings in the form of a dividend. Hormel pays out 47.8% 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 has raised its dividend for 51 consecutive years. Hormel is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Leucadia National and Hormel’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Leucadia National $11.44 billion 0.75 $171.72 million $1.65 14.56
Hormel $9.17 billion 2.05 $846.73 million $1.57 22.58

Hormel has lower revenue, but higher earnings than Leucadia National. Leucadia National is trading at a lower price-to-earnings ratio than Hormel, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Leucadia National and Hormel, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Leucadia National 0 0 0 0 N/A
Hormel 1 4 5 0 2.40

Hormel has a consensus target price of $34.33, suggesting a potential downside of 3.15%. Given Hormel’s higher possible upside, analysts clearly believe Hormel is more favorable than Leucadia National.

Institutional and Insider Ownership

75.6% of Leucadia National shares are owned by institutional investors. Comparatively, 39.4% of Hormel shares are owned by institutional investors. 10.2% of Leucadia National shares are owned by insiders. Comparatively, 3.5% of Hormel shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Leucadia National and Hormel’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Leucadia National 1.81% 6.25% 1.39%
Hormel 9.92% 17.44% 12.29%

Summary

Hormel beats Leucadia National on 10 of the 16 factors compared between the two stocks.

Leucadia National Company Profile

Leucadia National Corporation operates as a diversified holding company that focuses on financial service businesses and investments in the Americas, Europe, and Asia. Its services include equities research, sales, and trading; financing, securities lending, and other brokerage; wealth management; fixed income sales and trading; futures; equity capital markets, debt capital markets, and financial advisory; and asset management services. The company also provides online foreign exchange trading, contract for difference trading, spread betting, and related services. In addition, it develops and owns residential and mixed-use real estate properties in California, New York, Florida, Virginia, South Carolina, and Maine; provides capital solutions, investment sales advisory, and mortgage servicing for multifamily and commercial properties; and purchases automobile installment contracts, as well as owns and manages a portfolio of leases on used Harley-Davidson motorcycles. Further, it processes and markets fresh and chilled boxed beef, ground beef, beef by-products, consumer-ready beef and pork, and wet blue leather; oil and gas properties in the Bakken Shale oil field in North Dakota and Montana, and the Denver-Julesburg Basin in Wyoming; owns and operates 28 automobile dealerships; offers fixed wireless broadband services in Italy; manufactures and markets plastic netting and wood products; and mines gold and silver ores. The company was formerly known as Talcott National Corp. and changed its name to Leucadia National Corporation in June 1980. Leucadia National Corporation was founded in 1968 and is headquartered in New York, New York.

Hormel Company Profile

Hormel Foods Corporation produces and markets various meat and food products in the United States and internationally. The company operates through five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, Specialty Foods, and International & Other. It offers various perishable meat products, including fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamole, and bacon; and shelf-stable products, such as canned luncheon meats, peanut butter, chilies, shelf-stable microwaveable meals, hash, stews, meat spreads, flour and corn tortillas, salsas, tortilla chips, and other products. The company also provides turkey products; nutritional food products and supplements; dessert and drink mixes; and industrial gelatin products. It sells its products through sales personnel, as well as through 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 based in Austin, Minnesota.

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