FOODS Consumer Staples (NYSE: HRL) Earnings Results

Rating BUY INVESTMENT SUMMARY Suitability Growth & Income We have recently upgraded shares of Hormel Foods (HRL) to Date November 25, 2008 a Buy rating from a Hold, as we believe the stock price has Price $28.41 pulled back to levels that represent an attractive buying Dividend $0.76 opportunity. We believe the market is too focused on Yield 2.7% near-term challenges, while undervaluing the company's solid Company Overview long-term earnings growth outlook, strong financial position, Founded in 1891, Hormel Foods Corp produces a and potential for rising dividends. variety of meat and food products. The company markets its products under the Hormel, Jennie-O Turkey Store, Dinty Moore, , Chi Chi's Solid Long-term Track Record of Growth Mexican, Lloyd's Barbecue, and Valley Fresh Hormel has a solid track record of posting consistent growth in brands. Hormel also produces a line of easy to earnings and dividends. We expect its focus on creating innovative swallow and nutritional products distributed to and convenient products to continue to drive long-term growth, and hospitals and nursing homes. acquisitions should further enhance the company's product offering Market Data and growth rate going forward. Over the next five years, we forecast earnings per share (EPS) growth to average 8% per year, and 52-Week Range $42.77 – $33.39 dividend increases to average 10% per year. Market Cap. $4.9bn. Div. Pmt. Months Feb May Aug Nov Commodity Markets Appear More Manageable for Hormel Est. Earnings Date Aug 21, 2008 The commodity market has been quite challenging for Hormel recently, with rising feed costs in Hormel's Jennie-O turkey Valuation 2007A 2008A 2009E operations driving profitability lower. Looking ahead, we believe the Earnings 2.17 2.08 2.25 commodity environment appears more manageable for Hormel. P/E 13.1x 13.7x 12.6x Turmoil in the financial markets has driven commodity prices lower, PEGY 1.2x 1.3x 1.2x which should help Hormel's profitability to stabilize in 2009 and gradually improve over time. Growth Outlook Excellent Financial Position Balances the Challenge Est. 5-Yr. EPS Growth 8% Hormel's balance sheet is among the strongest in the entire food Est. 5-Yr. Div. Growth 10% industry, which affords the company significant financial flexibility to make acquisitions, repurchase shares, and increase the dividend. Financial Data The company is focused on increasing the amount of cash returned % Revenues International 4% to shareholders in dividends and share buybacks, while financing Debt Ratings (S&P/Moody's) A/A2 more acquisitions with debt going forward. Dividends can be increased, decreased or totally eliminated at any point without notice. Valuation We view Hormel shares as undervalued at 13 times our 2009 EPS Companies with international exposure have special risks including those related to currency fluctuations estimate. The stock is trading near the low end of its historical P/E and political and economic events. range relative to other food stocks, which we believe represents a good long-term buying opportunity in the shares. Headquarters United States of America Analyst Matt Arnold, CFA Risks We believe the biggest risk to our Buy rating is adverse price Associate swings in key protein and grain commodities. Also, we see a greater 1 Year Price History for HRL risk of product recalls associated with meat products, where 45 Hormel's product portfolio is heavily reliant. 40 35 30 25 20 Q1 Q2 Q3 2008 Created by BlueMatrix Please see important disclosure information on page 4 of this report. Page 1 of 4 November 25, 2008 HORMEL FOODS (NYSE: HRL)

RECENT NEWS AND ANALYSIS Figure 1 - Hormel Foods Sales Mix 11/25/08: Hormel reported fourth-quarter earnings per share (EPS) of $0.50, which was consistent with the company's disappointing preannouncement on 10/20/08. Earnings declined from the prior-year period due to significant pressure on earnings in its Jennie-O Turkey operation, negative product mix, and investment declines in its supplemental retirement plans. The company issued 2009 EPS guidance of $2.15 to $2.25, which represents growth of 3% to 8%. We have lowered our estimate by $0.02 to $2.25, which we believe is achievable. Recent declines in commodity prices should result in a much more manageable cost environment for Hormel as the year progresses, in our view. Hormel has five separate business divisions (see 10/21/08: We are upgrading our rating on Hormel figure 1), which sell food and meat products to shares to a Buy from a Hold, as we believe the stock consumers through a combination of retail, price has declined to levels that represent an restaurant, and other foodservice outlets. We view attractive long-term buying opportunity. While the the diversification of Hormel's businesses favorably, reduction in 2008 EPS guidance on 10/20/08 was a as we believe it enables the company to post more disappointment, we would point out the primary consistent results over time. Historically, when one reason (a decline in the value of investments held in business is under pressure, another division has a trust for employee retirement savings) stemmed been able to post strong results to offset it. In the from issues outside of the company's core past 20 years, Hormel has posted growth in earnings operations. Further, we believe Hormel is now facing per share in all but two of them. The company has a more manageable commodity environnment as a increased its dividend for 42 consecutive years. result of recent declines in the financial markets. With profitability poised to stabilize in fiscal 2009, and the Approximately 55% of Hormel's profits are derived stock trading toward the low end of its historical P/E from refrigerated and frozen meat and turkey range, we see an opportunity in the stock for products via its Refrigerated Foods and Jennie-O growth-and-income investors. Turkey Store divisions. The company's strategy in meats is to offer the consumer convenient, easy to prepare meats in a variety of formats, including INDUSTRY AND COMPANY OUTLOOK cured, marinated, heat and serve, and ready to eat In our view, pricing power of food companies is a key formats. In general, meats are the most expensive factor in determining the long-term winners and part of a meal, and they also tend to require the most losers in the industry. We believe the winners will be cooking expertise. Hormel gives the consumer companies with solidly positioned brand portfolios options that require little time or cooking expertise. that enable increases in pricing through time, while Hormel's meat brands include Hormel, Lloyd's also maintaining positive growth in volumes sold. We barbecue items, Cure 81 ham, Jennie-O Turkey view Hormel Foods favorably in this respect. We products, Always Tender marinated products, and believe the company's focus on creating innovative Natural Choice deli meats. Hormel's competitors in products which satisfy consumers' demands for meats include Kraft's Oscar Mayer brand, Sara Lee's convenient and easy-to-prepare items enables Hillshire Farm and Jimmy Dean brands (among pricing power. others), and Smithfield's Butterball brand. In addition, Hormel competes with a number of smaller players, including grocers' private label meat offerings. Meat categories tend to be very fragmented, with market share spread across a vast number of competitors. The remaining 45% of profits are generated from sales of packaged food items via the Specialty Foods, International, and Grocery Products divisions.

Page 2 of 4 November 25, 2008 HORMEL FOODS (NYSE: HRL)

Hormel's grocery product offering spans a variety of Figure 2 - EPS Growth Track Record and food categories, and its major brands include , Forecast Hormel and Stagg chilis, Chi Chi's mexican items, Compleats microwavable meals, and Dinty Moore beef stew. Hormel is driving growth in its grocery business primarily through product innovation, particularly with added convenience in its products like microwavable packaging. Hormel's biggest competitors in packaged food categories are from companies like Kraft, , Campbell Soup, and Heinz. In addition to traditional packaged food products, Hormel's Specialty Foods division manufactures a number of easy to swallow and nutritional products, which it markets to nursing homes and hospitals. We see this as a long-term growth opportunity, given the FINANCIAL POSITION general aging of the U.S. population. In our view, Hormel's financial position is very strong. While relatively small, Hormel is benefitting from the Debt ratios are considerably below those of peers above-average growth of its international business. within the food industry, and Hormel's credit rating Hormel exports consumer and pork products under from Standard & Poor's is A, which is solidly the Spam, Stagg, and Hormel brands internationally investment-grade. We believe Hormel's financial in Asia, the U.K., Europe and Australia. We expect position affords the company significant flexibility to Hormel to continue to benefit from international make acquisitions to complement its existing product expansion, with sales growth averaging about 10% portfolio and enhance its growth profile. We believe over the next five years. the company will primarily finance these acquisitions with debt. However, we believe Hormel will continue Commodity Markets Appear More Manageable its conservative approach to financing the business, Recently, Hormel has faced a very challenging and we do not expect it to stretch itself too far commodity cost environment. Within its Jennie-O financially to put its investment-grade credit rating in Turkey operations, Hormel is seeing significantly jeopardy. higher feed costs due to higher grain prices. Higher energy, packaging, and ingredient costs have also The company also generates significant amounts of put pressure on Hormel's packaged foods business. cash, which we believe will enable the company to reward shareholders through both share buybacks As a result of the recent downturn in the financial and dividend increases. The company has a goal of markets, commodity prices have pulled back increasing its dividend yield to levels that are closer significantly, and many are actually trading below to those of other packaged food stocks. Hormel their values of a year ago. As a result, we believe the shares have averaged a dividend yield below 2.0%, commodity cost environment has become more while packaged food stocks in general have manageable for Hormel. While volatility is likely to averaged a yield closer to 2.5%. We forecast persist and some commodities could continue to dividend increases over the next five years that represent headwinds to the company, these should average about 12% per year, with larger pressures now appear to be more moderate. We increases likely in the next few years, and increases believe Hormel is much more capable of managing a closer to our 8% EPS growth forecast likely over the gradual pace of commodity inflation than the severe longer term. pace that has persisted in much of 2008. Following a decline in EPS in 2008, we expect Hormel to return to positive growth in 2009, and return to its longer-term trend by 2010. See figure 2 for our forecasted growth in earnings per share over the next five years.

Page 3 of 4 November 25, 2008 HORMEL FOODS (NYSE: HRL) Important Research Disclosures Three Year Rating and Price History for: HORMEL FOODS as of 11-24-2008

Initiated Coverage (HOLD) 4/30/08...... HOLD 4/30/08--10/21/08

04/30/08 10/21/08 I:H:$39.41 B:$29.09 45 40

35 30 25 20 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 2006 2007 2008 Created by BlueMatrix Data used to create price chart is provided by Reuters

BUY HOLD SELL Stocks 63% 33% 4% Investment Banking Services 5% 7% 9% Buy (B) Hold (H) Sell (S) FYI (FI) Our opinion is to Buy this stock. We Our opinion is to keep this stock. We believe the Our opinion is to Sell this stock. We believe the For information. Factual, no opinion. believe its fundamentals and/or valuation fundamentals and/or valuation are stable. Or a fundamentals are deteriorating considerably and/or are compelling. special situation exists, such as a merger, that a recovery is highly uncertain. Or we believe the warrants no action. stock is significantly overvalued. Analyst Certification • I certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers; and no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in the research report. Matt Arnold, CFA Important Disclosures • Initiated Coverage (HOLD) 4/30/08...... HOLD 4/30/08--10/21/08 • Edward Jones does not have any material business relationships with this company. Important Disclaimers • It is the policy of Edward Jones that analysts or their associates are not permitted to have an ownership position in the companies they follow directly or through derivatives. • Analysts are not directly compensated based upon investment banking transactions or activities. • This opinion is based on information believed reliable but not guaranteed. The foregoing is for INFORMATION ONLY. Additional information is available on request. Price shown is subject to change. Past performance is no guarantee of future results. • Information about research distribution is available through the Investments and Services link on www.edwardjones.com • For UK clients only: Edward Jones Limited is authorised and regulated by the Financial Services Authority and is a member of the London Stock Exchange. Registered office: 11 Westferry Circus, Canary Wharf, London E14 4HH. Registered in England and Wales under number 3403976. Edward Jones Limited is a wholly owned subsidiary of and disseminates research recommendations produced by Edward D. Jones & Co., L.P. (Edward Jones). Edward Jones has established systems, controls and procedures to identify and manage conflicts of interest in respect of research recommendations which are sufficient to ensure, with reasonable confidence, that the risk of damage to your interest will be prevented. A summary of our Conflicts of Interest Policy is provided in our Terms & Conditions of Business and also on our website at www.edwardjones.com. If you would like further details on our Conflicts of Interest Policy, please speak to your Financial Adviser. • For Canada clients only: Member CIPF • For U.S. clients only: Member SIPC • Estimated growth rates represent an expected annual increase over the next full business cycle, typically a period of approx. 5 years. • Due to the size and scope of this company's business, Edward Jones does not consider any analyst's visit to the company's sites as having allowed the analyst to observe the company's material operations. • Holders of shares of companies domiciled outside the country of residence of the holder are generally subject to a withholding tax on dividends paid by that company. Subject to certain conditions and limitations, these holders may be entitled to a partial refund of the withholding tax or the withholding taxes may be treated as foreign taxes eligible for a deduction or credit against the holder's tax liability. Holders should consult their own tax advisors regarding ownership of shares and the procedures for claiming a deduction, tax credit or a refund of the withholding tax. When investing in companies incorporated outside your own country of residence, an investor should consider all other material risks including currency risk, political risk, liquidity risk and accounting rules differences, which can adversely affect the value of your investment. Please consult your Financial Adviser for more information. • Debt ratings should not be considered an indication of future performance.

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