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Hormel Foods (HRL) to Post Q4 Earnings: What Awaits the Stock?

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Hormel Foods Corporation (HRL - Free Report) is likely to register top-and-bottom-line declines when it reports fourth-quarter fiscal 2023 earnings on Nov 29. The Zacks Consensus Estimate for revenues is pegged at $3.3 billion, suggesting a decrease of 0.8% from the prior-year quarter’s reported figure.

The consensus mark for quarterly earnings has remained unchanged in the past 30 days at 45 cents per share. This indicates a drop of 11.8% from the year-ago quarter’s reported figure. HRL has a trailing four-quarter negative earnings surprise of 2.3%, on average.

Factors to Note

Hormel Foods’ International segment sales were soft in the third quarter of fiscal 2023 due to reduced branded export sales and lower results in China. On its last earnings call, management highlighted that it expects to witness continued weakness in the International segment, alongside earnings pressure from heightened competition in the Retail business. 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 continues to operate in a volatile, complex and high-cost environment.  The company’s adjusted operating income was $286.8 million in the third quarter of fiscal 2023, 1.5% lower than last year. The downside can be attributed to supply-chain disruptions because of the third-party logistics provider shutdown. The company saw the impacts of shortages, additional logistic costs and escalated levels of distressed inventory. The persistence of these downsides is a concern.

Hormel Foods projects fiscal fourth-quarter net sales in the band of $3.1-$3.6 billion. It expects fiscal 2023 net sales to be down 4% to flat year over year, reflecting to-date performance as well as expectations of raw material input costs in the fourth quarter. The bottom line is envisioned to have declined year over year in the fourth quarter.  Fiscal 2023 adjusted earnings per share (EPS) are expected in the band of $1.61-$1.67, down from $1.82 reported in the year-ago period.

Hormel Foods Corporation Price, Consensus and EPS Surprise

Hormel Foods Corporation Price, Consensus and EPS Surprise

Hormel Foods Corporation price-consensus-eps-surprise-chart | Hormel Foods Corporation Quote

Our model suggests a 4.3% decline in the International unit’s net sales for the fourth quarter. We expect an 11.3% decline in the adjusted operating income and a 120-bps contraction in the adjusted operating margin in the fourth quarter.

However, the focus on strengthening the business through acquisitions and capacity expansion initiatives has been an upside. In the fiscal fourth quarter, the company is likely to have benefited from the expanded distribution of the Applegate brand and a new capacity to support frozen breakfast sausage.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Hormel Foods this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

Hormel Foods carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -1.35%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Here are three companies worth considering as our model shows that these have the correct combination to beat on earnings this time:

Campbell Soup (CPB - Free Report) has an Earnings ESP of +0.07% and a Zacks Rank #3. The company is slated to witness a top-and-bottom-line decline when it reports first-quarter fiscal 2024 results. The Zacks Consensus Estimate for CPB’s quarterly revenues is pegged at $2.5 billion, which suggests a drop of 2.7% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Campbell Soup’s quarterly EPS has remained unchanged in the past 30 days at 87 cents, which suggests a decrease of 14.7% from the year-ago quarter’s level. CPB has a trailing four-quarter earnings surprise of 8.6%, on average.

Costco Wholesale (COST - Free Report) currently has an Earnings ESP of +5.23% and a Zacks Rank #3. The company is likely to register top-and-bottom-line growth when it reports first-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for Costco’s quarterly revenues is pegged at $57.7 billion, indicating a rise of 5.9% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Costco’s quarterly EPS of $3.44 suggests an increase of almost 11% from the year-ago quarter’s levels. COST has a trailing four-quarter earnings surprise of 2.1%, on average.

lululemon athletica (LULU - Free Report) currently has an Earnings ESP of +0.19% and a Zacks Rank of 3. The company is likely to register a bottom-line increase when it reports third-quarter fiscal 2023 numbers. The Zacks Consensus Estimate for the quarterly earnings per share of $2.27 suggests a rise from $2.00 reported in the year-ago quarter.

lululemon’s top line is expected to increase year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $2.19 billion, which indicates a rise of 17.8% from the figure reported in the prior-year quarter. lululemon has a trailing four-quarter earnings surprise of 6.8%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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