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Hormel Foods (HRL) Appears Dull on Supply-Chain, Cost Woes

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Hormel Foods Corporation (HRL - Free Report) has been facing supply-chain bottlenecks. The leading manufacturer and marketer of various meat and food products operates amid an inflationary cost environment.

These trends persisted in the company’s third-quarter fiscal 2023, wherein the top and the bottom line lagged the Zacks Consensus Estimate and net sales declined year over year. Management offered a dull view for fiscal 2023.

Let’s discuss this in detail. 

Supply-Chain Issues Hurt Q3

Hormel Foods continues to operate in a volatile, complex and high-cost environment. The company’s fiscal third-quarter results were hurt by weakness in the International segment and supply-chain disruptions. Quarterly net sales fell 2.3% to $2,963.3 million, with weakness across all segments. Net sales in the Retail, Foodservice and International units decreased 1.7%, 3% and 6%, respectively.

The company’s adjusted operating income was $286.8 million in the fiscal third quarter, 1.5% lower than last year. The downside can be attributed to supply-chain disruptions because of third-party logistics provider shutdown. The company saw impacts from shortages, additional logistic costs and escalated distressed inventory levels.

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Dull Outlook

Management expects to witness continued weakness in the International segment, alongside earnings pressure from heightened competition in the Retail business in fiscal 2023. The company also expects overall consumer spending to remain under pressure in the United States due to the resumption of student loan payments

Hormel Foods projects fiscal 2023 net sales to be down 4% to flat year over year, reflecting to-date performance and expectations of raw material input costs in the fiscal fourth quarter.  Fiscal 2023 adjusted earnings per share (EPS) are expected to be $1.61-$1.67, down from $1.82 reported in the year-ago period. The bottom line will likely decline year over year in the fiscal fourth quarter.

Shares of the Zacks Rank #5 (Strong Sell) company have dropped 4.6% in the past three months compared with the industry’s 2.4% decline.

Appetizing Food Picks

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The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings per share suggests growth of 5.8% and 10.4%, respectively, from the corresponding year-ago reported figures.

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The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales suggests growth of 6.7% from the year-ago period’s actuals. FLO has a trailing four-quarter earnings surprise of 7.6% on average.

Celsius Holdings (CELH - Free Report) , which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2. CELH delivered an earnings surprise of 100% in the last reported quarter.

The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 88.9% and 170.7%, respectively, from the year-ago reported numbers.

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