Back to top

Image: Bigstock

Hormel Foods (HRL) Misses Q4 Earnings, Raises Dividend

Read MoreHide Full Article

Meat and food products company, Hormel Foods Corporation (HRL - Free Report) reported mixed results for fourth-quarter fiscal 2016 (ended Oct 30, 2016).

Quarterly adjusted earnings came in at 45 cents per share, reflecting a 21.6% surge from the year-ago tally of 37 cents. However, the bottom line missed the Zacks Consensus Estimate by a penny.

For fiscal 2016, adjusted earnings came in at $1.64 per share versus the year-ago tally of $1.27 per share.

Inside the Headlines

In the fiscal fourth quarter, Hormel Foods generated net sales of $2,627.9 million, up 9.5% year over year, beating the Zacks Consensus Estimate of $2,625 million. The upside came on the back of robust segmental performance.

Hormel Foods’ cost of sales was up 6.5% year over year to $2,029.4 million. Gross margin expanded 220 basis points (bps) to 22.8%.

Quarterly selling, general and administrative expenses came in at $244 million, up 29.1% year over year.

The company’s operating margin was 13.9% compared to 12.2% in the year-ago quarter.

For fiscal 2016, net sales were $9,523.2 million versus $9,263.9 million recorded in the year-ago comparable period.

Segment Details

In the reported quarter, revenues from Grocery Products improved 16.4% to $491.7 million. The upside was driven by the inclusion of Justin’s LCC and higher demand for brands like Skippy and Spam.

Revenues at the Jennie-O Turkey Store segment jumped 28.8% to $541.4 million. The year-over-year improvement was supported by increased sales of Jennie-O branded foodservice products and recovery from Avian Influenza.

The company’s Refrigerated Foods segment garnered revenues of $1,237.3 million, up 7.6% year over year. The segmental sales improved due to higher sales of products like Applegate deli meats and Hormel Bacon.

International & Other revenues inched up 1.6% to $140.9 million. However, Hormel Foods stated that dismal market conditions in China had largely hurt its international sales during the quarter.

However, Specialty Foods revenues were down 19.7% to $216.7 million. The segmental sales declined due to the divestiture of Diamond Crystal Brands.

Other Financial Particulars

Exiting the fiscal fourth quarter, Hormel Foods had cash and cash equivalents of $415.1 million, up from $347.2 million as of Oct 25, 2015. However, the company’s long-term debt of $250 million (excluding current maturities) remained mostly unchanged.

For fiscal 2016, Hormel Foods generated cash of $992.8 million from operating activities, marginally up 0.1% year over year. Capital expenditure on purchase of property and plant totaled $249.3 million, compared to $125.6 million a year ago.

The company paid its 353rd consecutive quarterly dividend at an annualized rate of 58 cents, effective Nov 15, 2016.  

Outlook

Hormel Foods anticipates to boost its revenues in the upcoming fiscal year on the back of higher demand for its food services as well as retailing products. In addition, recovering market conditions of China are likely to drive top-line growth. The company anticipates to accrue organic sales growth of 5% in fiscal 2017. After eliminating the earnings of 3 cents per share from the Farmer John divestiture, Hormel Foods projects earnings within the range of $1.68–$1.74 per share in fiscal 2017.

HORMEL FOODS CP Price, Consensus and EPS Surprise

 

HORMEL FOODS CP Price, Consensus and EPS Surprise | HORMEL FOODS CP Quote

Sale of Meat Brand and Farming Operations

On Nov 21, 2016, Hormel Foods’ declared that it has inked a definitive agreement with the pork giant – Smithfield – to sell its Saag’s and Farmer John meat brands and three farming operations located in Arizona, California and Wyoming, against a cash payment of $145 million. The deal is expected to close by the end of 2016.

The move has been undertaken for freeing up productive resources. These possessions would be eventually deployed to fortify the company’s food products’ business in the near term.

Saag’s and Farmer John meat brands are currently owned by Clougherty Packing, LLC. The three farms belong to the company’s PFFJ, LLC. Both Clougherty Packing, LLC. and PFFJ, LLC. are subsidiary business arms of Hormel Foods.

Hormel Foods affirmed that the performance of the above mentioned businesses are sound, however they are not in sync with its ongoing corporate growth strategies.

Dividend

On Nov 21, 2016, Hormel Foods declared a 17% hike in its annual dividend, making the 51st successive annual dividend upsurge. The company raised its common stock based annual dividend to 68 cents per share from 58 cents per share.

Additionally, Hormel Foods’ board of directors approved the payment of the first quarterly dividend of 17 cents per share to its shareholders of record as of Jan 17, 2017. The dividend will be paid on Feb 15, marking the company’s 354th consecutive quarterly dividend payout.

Zacks Rank and Stocks to Consider

Hormel Foods currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks within the industry include Blue Buffalo Pet Products, Inc. (BUFF - Free Report) , Carriage Services Inc. (CSV - Free Report) and Dean Foods Company .

Blue Buffalo currently carries a Zacks Rank #2 (Buy) and has an average positive earnings surprise of 10.4% for the four trailing quarters.

Carriage Services currently carries a Zacks Rank #2 and has an average positive earnings surprise of 0.74% for the last four quarters.

Dean Foods currently carries a Zacks Rank #2 and has an average positive earnings surprise of 5.43% for the trailing four quarters.

The Best Place to Start Your Stock Search

Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Hormel Foods Corporation (HRL) - free report >>

Carriage Services, Inc. (CSV) - free report >>

Innovator Laddered Allocation (BUFF) - free report >>

Published in