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Hormel Foods (HRL) Q4 Earnings Beat, Sales Miss Estimates
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Hormel Foods Corporation (HRL - Free Report) posted fourth-quarter fiscal 2018 results, with the bottom line improving year over year. However, dismal Grocery Products and Jennie-O Turkey Store led to lower-than-expected sales. This marked the company’s fourth straight quarter of sales miss. Such aspects have lowered investors’ confidence in the stock that was down roughly 5% in the pre-market trading session on Nov 20.
Quarter in Detail
Quarterly earnings of 51 cents per share beat the Zacks Consensus Estimate of 46 cents. Moreover, the bottom line increased almost 24% year over year. The upside was backed by higher sales and benefits from tax reforms. Incidentally, effective tax rate during the quarter was 18.7% compared with 33.8% in the year-ago quarter.
Net sales came in at $2,524.7 million, which missed the Zacks Consensus Estimate of $2,556 million. Nevertheless, the top line inched up nearly 1.3% year over year backed by strength in the Refrigerated Foods and International divisions.
Hormel Foods Corporation Price, Consensus and EPS Surprise
Further, Hormel Foods witnessed a 1% decline in volumes. The downside was mainly caused by lower volumes in the Grocery Products and Jennie-O Turkey Store segments. On an organic basis, net sales and volumes declined 3.4% and 3.3% respectively, year over year.
Segment Details
Grocery Products’ sales went down 4% to $658.8 million as gains from Wholly Guacamole dips and Herdez salsas were countered by declines in the company’s contract manufacturing business.
Revenues in the Jennie-O Turkey Store segment fell nearly 3.7% to $ 466.8 million owing to reduced whole bird volumes and sales.
The company’s Refrigerated Foods segment generated sales of $ 1,232,7 million, up roughly 5.7% year over year. The upside was fueled by contributions from branded products like Hormel pepperoni, Applegate natural and organic products, Austin Blues authentic barbeque products as well as Hormel Natural Choice products. Additionally, the Columbus and Fontanini buyouts aided the segment’s performance. However, sales dropped 3% on an organic basis due to lower hog harvest volumes.
International & Other revenues were up about 7.3% to nearly $ 166.4 million. The upside can be attributed to Ceratti’s inclusion, increased export sales of SPAM luncheon meat and Skippy peanut butter. However, trade uncertainties weighed on fresh pork export volumes, sales and profits.
Costs/Margins
In the quarter, Hormel Foods’ cost of sales inched up 0.3% to approximately $1,987.3 million.
Selling, general and administrative expenses totaled $204.5 million, up from $194.2 million recorded in the year-ago quarter.
Operating income came in at $324.4 million, down 1.5%. Also, operating margin slid 40 basis points (bps) to 12.8%.
Balance Sheet/Cash Flow
Hormel Foods ended the quarter with cash and cash equivalents of $459.1 million and long-term debt of $624.8 million (excluding current maturities).
In fiscal 2018, Hormel Foods generated cash of $1,241.7 million from operating activities. Capital expenditure summed $390 million during the year. The company expects capital expenditures to be roughly $350 million for fiscal 2019.
During the fiscal, the company repurchased 1.4 million shares for nearly $47 million.
In a separate release, management raised the quarterly dividend rate by 12% to 84 cents per share from 75 cents earlier.
Outlook
Management stated that it will continue to augment portfolio strength through innovations and buyouts. The company is expects solid cash flows in fiscal 2019. Further, the company will ensure better business execution to counter global trade uncertainty and market volatility.
That said, the company envisions earnings in the range of $1.77-$1.91 in fiscal 2019. Further, net sales are expected in the band of $9.70-$10.20 billion.
Price Performance
Notably, this Zacks Rank #3 (Hold) stock has surged almost 20% in the past three months compared with the industry’sgain of 4.3%.
McCormick & Company, Incorporated (MKC - Free Report) has long-term EPS growth rate of 9% and a Zacks Rank #2 (Buy).
Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has long-term EPS growth rate of 11%.
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Hormel Foods (HRL) Q4 Earnings Beat, Sales Miss Estimates
Hormel Foods Corporation (HRL - Free Report) posted fourth-quarter fiscal 2018 results, with the bottom line improving year over year. However, dismal Grocery Products and Jennie-O Turkey Store led to lower-than-expected sales. This marked the company’s fourth straight quarter of sales miss. Such aspects have lowered investors’ confidence in the stock that was down roughly 5% in the pre-market trading session on Nov 20.
Quarter in Detail
Quarterly earnings of 51 cents per share beat the Zacks Consensus Estimate of 46 cents. Moreover, the bottom line increased almost 24% year over year. The upside was backed by higher sales and benefits from tax reforms. Incidentally, effective tax rate during the quarter was 18.7% compared with 33.8% in the year-ago quarter.
Net sales came in at $2,524.7 million, which missed the Zacks Consensus Estimate of $2,556 million. Nevertheless, the top line inched up nearly 1.3% year over year backed by strength in the Refrigerated Foods and International divisions.
Hormel Foods Corporation Price, Consensus and EPS Surprise
Hormel Foods Corporation Price, Consensus and EPS Surprise | Hormel Foods Corporation Quote
Further, Hormel Foods witnessed a 1% decline in volumes. The downside was mainly caused by lower volumes in the Grocery Products and Jennie-O Turkey Store segments. On an organic basis, net sales and volumes declined 3.4% and 3.3% respectively, year over year.
Segment Details
Grocery Products’ sales went down 4% to $658.8 million as gains from Wholly Guacamole dips and Herdez salsas were countered by declines in the company’s contract manufacturing business.
Revenues in the Jennie-O Turkey Store segment fell nearly 3.7% to $ 466.8 million owing to reduced whole bird volumes and sales.
The company’s Refrigerated Foods segment generated sales of $ 1,232,7 million, up roughly 5.7% year over year. The upside was fueled by contributions from branded products like Hormel pepperoni, Applegate natural and organic products, Austin Blues authentic barbeque products as well as Hormel Natural Choice products. Additionally, the Columbus and Fontanini buyouts aided the segment’s performance. However, sales dropped 3% on an organic basis due to lower hog harvest volumes.
International & Other revenues were up about 7.3% to nearly $ 166.4 million. The upside can be attributed to Ceratti’s inclusion, increased export sales of SPAM luncheon meat and Skippy peanut butter. However, trade uncertainties weighed on fresh pork export volumes, sales and profits.
Costs/Margins
In the quarter, Hormel Foods’ cost of sales inched up 0.3% to approximately $1,987.3 million.
Selling, general and administrative expenses totaled $204.5 million, up from $194.2 million recorded in the year-ago quarter.
Operating income came in at $324.4 million, down 1.5%. Also, operating margin slid 40 basis points (bps) to 12.8%.
Balance Sheet/Cash Flow
Hormel Foods ended the quarter with cash and cash equivalents of $459.1 million and long-term debt of $624.8 million (excluding current maturities).
In fiscal 2018, Hormel Foods generated cash of $1,241.7 million from operating activities. Capital expenditure summed $390 million during the year. The company expects capital expenditures to be roughly $350 million for fiscal 2019.
During the fiscal, the company repurchased 1.4 million shares for nearly $47 million.
In a separate release, management raised the quarterly dividend rate by 12% to 84 cents per share from 75 cents earlier.
Outlook
Management stated that it will continue to augment portfolio strength through innovations and buyouts. The company is expects solid cash flows in fiscal 2019. Further, the company will ensure better business execution to counter global trade uncertainty and market volatility.
That said, the company envisions earnings in the range of $1.77-$1.91 in fiscal 2019. Further, net sales are expected in the band of $9.70-$10.20 billion.
Price Performance
Notably, this Zacks Rank #3 (Hold) stock has surged almost 20% in the past three months compared with the industry’sgain of 4.3%.
Check These Solid Food Stocks
Chefs’ Warehouse (CHEF - Free Report) , with long-term earnings per share (EPS) growth rate of 19%, sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
McCormick & Company, Incorporated (MKC - Free Report) has long-term EPS growth rate of 9% and a Zacks Rank #2 (Buy).
Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has long-term EPS growth rate of 11%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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