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Here's Why Hormel Foods (HRL) Dropped More Than 15% in 3 Months
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Hormel Foods Corporation (HRL - Free Report) is operating in a challenging environment that remains volatile and complex. The leading manufacturer and marketer of various meat and food products is not immune to rising costs. Weakness in the International business remains a concern.
Shares of the Zacks Rank #4 (Sell) company have slumped 17% in the past three months compared with the industry’s 4.4% decline. The company’s stock has lagged the Zacks Consumer Staples’s growth of 5.7% during this time.
Let’s discuss this in detail.
Macroeconomic Challenges Hurt
Hormel Foods continues to operate in a dynamic operating landscape, including sluggish consumer demand, inflationary hurdles and challenges in the company’s turkey business. Thanks to these headwinds, the company delivered drab fourth-quarter fiscal 2023 results. The top and the bottom line declined year over year and lagged the Zacks Consensus Estimate in the quarter. Adjusted earnings of 42 cents per share declined from 51 cents reported in the year-ago quarter. Net sales of $3,198.1 million declined 2.6%.
Image Source: Zacks Investment Research
Cost Concerns
Hormel Foods has been witnessing rising advertising expenses for a while. During the fiscal 2023, the company’s advertising investments were $160 million, up from $157 million reported in the year-ago period. In its last earnings call, management highlighted that it expects advertising investments to remain escalated during the fiscal 2024 as it continues to support leading brands in the marketplace. Certainly, a rise in such costs is likely to put pressure on the company’s profits.
International Unit Weak
Hormel Foods has been battling weakness in the International segment for a while. The fiscal 2023 remained particularly challenging for this business, thanks to softness in China, soft commodity markets and higher-than-anticipated elasticities on branded export business. In the fiscal fourth quarter, International net sales declined 12% due to reduced branded export sales and soft sales in China. In its last earnings call, management highlighted that it expects results in the first quarter of fiscal 2024 to remain drab in the particular segment, with recovery starting in the second quarter.
Wrapping Up
Hormel Foods intends to strengthen its business on the back of strategic acquisitions. Management is on track to transform and modernize the company. It continues to focus on initiatives like One Supply Chain, aimed at reducing costs and complexity while investing in long-term growth.
Whether the upsides can help Hormel Foods stay afloat amid hurdles is yet to be seen.
The Zacks Consensus Estimate for MGP Ingredients’ current financial year sales and earnings suggests growth of almost 6% and 14.2%, respectively, from the year-ago reported figures. MGPI has a trailing four-quarter earnings surprise of 16.2% on average.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year sales suggests growth of 29.4% from the year-ago reported figure.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 9.9%, on average.
The Zacks Consensus Estimate for Kraft Heinz’s current financial year sales and earnings suggests growth of 1% and 6.5%, respectively, from the year-ago reported numbers.
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Here's Why Hormel Foods (HRL) Dropped More Than 15% in 3 Months
Hormel Foods Corporation (HRL - Free Report) is operating in a challenging environment that remains volatile and complex. The leading manufacturer and marketer of various meat and food products is not immune to rising costs. Weakness in the International business remains a concern.
Shares of the Zacks Rank #4 (Sell) company have slumped 17% in the past three months compared with the industry’s 4.4% decline. The company’s stock has lagged the Zacks Consumer Staples’s growth of 5.7% during this time.
Let’s discuss this in detail.
Macroeconomic Challenges Hurt
Hormel Foods continues to operate in a dynamic operating landscape, including sluggish consumer demand, inflationary hurdles and challenges in the company’s turkey business. Thanks to these headwinds, the company delivered drab fourth-quarter fiscal 2023 results. The top and the bottom line declined year over year and lagged the Zacks Consensus Estimate in the quarter. Adjusted earnings of 42 cents per share declined from 51 cents reported in the year-ago quarter. Net sales of $3,198.1 million declined 2.6%.
Image Source: Zacks Investment Research
Cost Concerns
Hormel Foods has been witnessing rising advertising expenses for a while. During the fiscal 2023, the company’s advertising investments were $160 million, up from $157 million reported in the year-ago period. In its last earnings call, management highlighted that it expects advertising investments to remain escalated during the fiscal 2024 as it continues to support leading brands in the marketplace. Certainly, a rise in such costs is likely to put pressure on the company’s profits.
International Unit Weak
Hormel Foods has been battling weakness in the International segment for a while. The fiscal 2023 remained particularly challenging for this business, thanks to softness in China, soft commodity markets and higher-than-anticipated elasticities on branded export business. In the fiscal fourth quarter, International net sales declined 12% due to reduced branded export sales and soft sales in China. In its last earnings call, management highlighted that it expects results in the first quarter of fiscal 2024 to remain drab in the particular segment, with recovery starting in the second quarter.
Wrapping Up
Hormel Foods intends to strengthen its business on the back of strategic acquisitions. Management is on track to transform and modernize the company. It continues to focus on initiatives like One Supply Chain, aimed at reducing costs and complexity while investing in long-term growth.
Whether the upsides can help Hormel Foods stay afloat amid hurdles is yet to be seen.
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MGP Ingredients, Inc. (MGPI - Free Report) produces and markets ingredients and distillery products to the packaged goods industry. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for MGP Ingredients’ current financial year sales and earnings suggests growth of almost 6% and 14.2%, respectively, from the year-ago reported figures. MGPI has a trailing four-quarter earnings surprise of 16.2% on average.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year sales suggests growth of 29.4% from the year-ago reported figure.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 9.9%, on average.
The Zacks Consensus Estimate for Kraft Heinz’s current financial year sales and earnings suggests growth of 1% and 6.5%, respectively, from the year-ago reported numbers.