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HRL's Q3 Earnings Top, Sales Decline on Weak Commodity Markets
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Hormel Foods Corporation (HRL - Free Report) delivered third-quarter fiscal 2024 results, wherein the top and bottom lines declined year over year. Net sales missed the Zacks Consensus Estimate.
The company has reduced its fiscal 2024 net sales outlook due to weaker-than-expected commodity markets, production disruptions at the Suffolk, VA facility and declines in the contract manufacturing sector. Management also narrowed its earnings guidance range.
HRL’s Quarterly Results: Key Metrics & Insights
Hormel Foods’ adjusted earnings of 37 cents per share beat the Zacks Consensus Estimate of 36 cents. However, the bottom line declined from the 40 cents per share recorded in the same period last year.
Net sales of $2,898.4 million declined from $2,963.3 million reported in the year-ago quarter. The metric came below the Zacks Consensus Estimate of $2,955.8 million. Volumes declined from 1.09 billion lbs. to 1.02 billion lbs. in the fiscal third quarter.
The gross profit came in at $488.4 million, down from $498 million reported in the year-ago quarter.
Selling, general and administrative (SG&A) expenses amounted to $259.7 million for the quarter, a decrease from $291.1 million in the year-ago period. Advertising investments came in at $40 million, down from $43 million in the year-ago period. The decline is partly due to reduced support for the Planters brand resulting from production disruptions at the Suffolk, VA facility. The company forecasts an increase in advertising expenses for the full year.
The adjusted operating income was $267.2 million, a decrease from $286.8 million in the same quarter last year. The adjusted operating margin fell to 9.2% compared to 9.7% in the previous year’s quarter.
Hormel Foods Corporation Price, Consensus and EPS Surprise
HRL Provides Q3 Revenue & Profit Insights by Segment
Net sales in the Retail unit dropped 6.6% year over year to $1,767.3 million, while volumes fell 9%. The decline was mainly due to substantial year-over-year declines in both volume and pricing for whole bird turkeys, reduced sales of Planters snack nuts due to production disruptions at the Suffolk, VA facility, and lower volumes in center-store and contract manufacturing.
However, this was partially countered by net sales growth for several key brands, such as Hormel Black Label bacon, Applegate natural and organic meats, Jennie-O ground turkey, Skippy peanut butter, Wholly guacamole, Herdez salsas and sauces, and Hormel Square Table entrees. Segment profit fell 15% as the advantages of reduced logistics expenses and savings from the Transform and Modernize initiative were overshadowed by the negative impact of lower net sales.
Net sales in the Foodservice segment increased 7.1% to $954 million, with volumes up 2%. The positive performance is primarily due to strong results in the turkey, premium prepared proteins, bacon and pepperoni categories. Key products like Hormel Fire Braised meats, Hormel Bacon cooked bacon, Cafe H globally inspired proteins, and Rosa Grande premium pepperoni saw significant volume and net sales growth. Additionally, branded Jennie-O turkey items continue to boost top-line results. Despite higher sales, segment profit decreased 2.6% due to increased SG&A expenses outweighing the revenue gains.
Net sales in the International unit inched down 1.9% year over year to $177.2 million, whereas volumes tumbled 13%. Strong volume and net sales growth for SPAM luncheon meat, refrigerated foodservice exports, and Skippy peanut butter exports were overshadowed by a challenging comparison to the previous year, which saw higher export volumes of low-margin commodity fresh pork and turkey. Segment profit saw a significant increase of 78.3%, driven by improved export margins, growth from investments in the Philippines and Indonesia, and favorable cost conditions in China.
Hormel Foods’ Financial Health Snapshot
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $537.5 million and total long-term debt (excluding current maturities) of $2,851.6 million.
For the fiscal third quarter, cash flow from operations was $218 million, while capital expenditures in the quarter were $65 million. Management anticipates capital expenditure of $280 million in fiscal 2024.
Image Source: Zacks Investment Research
What to Expect From HRL in FY24?
The company has revised its fiscal 2024 net sales forecast to $11.8 billion to $12.1 billion, down from the previous range of $12.2 billion to $12.5 billion.
The company has adjusted its expected range for diluted adjusted earnings per share (EPS) to $1.57 to $1.63, down from the previous range of $1.55 to $1.65.
The fiscal 2024 guidance reflects the impact of production disruptions at the Suffolk, VA facility. Additionally, the company is evaluating the financial effects of storm damage at its Papillion, Nebraska, facility. However, the Transform and Modernize initiative is expected to positively influence earnings.
HRL’s stock has risen 8.3% in the past three months compared with the industry’s growth of 14.8%.
Better-Ranked Food Bets
Here, we have highlighted three better-ranked food stocks, namely, The Chef's Warehouse (CHEF - Free Report) , Pilgrim’s Pride (PPC - Free Report) and Ollie's Bargain Outlet (OLLI - Free Report) .
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimated figure for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, currently carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.
The Zacks Consensus Estimated figure for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.1% and 12.71%, respectively, from the year-earlier levels.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings calls for growth of around 1.1% and 4.2%, respectively, from the year-ago reported numbers.
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HRL's Q3 Earnings Top, Sales Decline on Weak Commodity Markets
Hormel Foods Corporation (HRL - Free Report) delivered third-quarter fiscal 2024 results, wherein the top and bottom lines declined year over year. Net sales missed the Zacks Consensus Estimate.
The company has reduced its fiscal 2024 net sales outlook due to weaker-than-expected commodity markets, production disruptions at the Suffolk, VA facility and declines in the contract manufacturing sector. Management also narrowed its earnings guidance range.
HRL’s Quarterly Results: Key Metrics & Insights
Hormel Foods’ adjusted earnings of 37 cents per share beat the Zacks Consensus Estimate of 36 cents. However, the bottom line declined from the 40 cents per share recorded in the same period last year.
Net sales of $2,898.4 million declined from $2,963.3 million reported in the year-ago quarter. The metric came below the Zacks Consensus Estimate of $2,955.8 million. Volumes declined from 1.09 billion lbs. to 1.02 billion lbs. in the fiscal third quarter.
The gross profit came in at $488.4 million, down from $498 million reported in the year-ago quarter.
Selling, general and administrative (SG&A) expenses amounted to $259.7 million for the quarter, a decrease from $291.1 million in the year-ago period. Advertising investments came in at $40 million, down from $43 million in the year-ago period. The decline is partly due to reduced support for the Planters brand resulting from production disruptions at the Suffolk, VA facility. The company forecasts an increase in advertising expenses for the full year.
The adjusted operating income was $267.2 million, a decrease from $286.8 million in the same quarter last year. The adjusted operating margin fell to 9.2% compared to 9.7% in the previous year’s quarter.
Hormel Foods Corporation Price, Consensus and EPS Surprise
Hormel Foods Corporation price-consensus-eps-surprise-chart | Hormel Foods Corporation Quote
HRL Provides Q3 Revenue & Profit Insights by Segment
Net sales in the Retail unit dropped 6.6% year over year to $1,767.3 million, while volumes fell 9%. The decline was mainly due to substantial year-over-year declines in both volume and pricing for whole bird turkeys, reduced sales of Planters snack nuts due to production disruptions at the Suffolk, VA facility, and lower volumes in center-store and contract manufacturing.
However, this was partially countered by net sales growth for several key brands, such as Hormel Black Label bacon, Applegate natural and organic meats, Jennie-O ground turkey, Skippy peanut butter, Wholly guacamole, Herdez salsas and sauces, and Hormel Square Table entrees. Segment profit fell 15% as the advantages of reduced logistics expenses and savings from the Transform and Modernize initiative were overshadowed by the negative impact of lower net sales.
Net sales in the Foodservice segment increased 7.1% to $954 million, with volumes up 2%. The positive performance is primarily due to strong results in the turkey, premium prepared proteins, bacon and pepperoni categories. Key products like Hormel Fire Braised meats, Hormel Bacon cooked bacon, Cafe H globally inspired proteins, and Rosa Grande premium pepperoni saw significant volume and net sales growth. Additionally, branded Jennie-O turkey items continue to boost top-line results. Despite higher sales, segment profit decreased 2.6% due to increased SG&A expenses outweighing the revenue gains.
Net sales in the International unit inched down 1.9% year over year to $177.2 million, whereas volumes tumbled 13%. Strong volume and net sales growth for SPAM luncheon meat, refrigerated foodservice exports, and Skippy peanut butter exports were overshadowed by a challenging comparison to the previous year, which saw higher export volumes of low-margin commodity fresh pork and turkey. Segment profit saw a significant increase of 78.3%, driven by improved export margins, growth from investments in the Philippines and Indonesia, and favorable cost conditions in China.
Hormel Foods’ Financial Health Snapshot
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $537.5 million and total long-term debt (excluding current maturities) of $2,851.6 million.
For the fiscal third quarter, cash flow from operations was $218 million, while capital expenditures in the quarter were $65 million. Management anticipates capital expenditure of $280 million in fiscal 2024.
Image Source: Zacks Investment Research
What to Expect From HRL in FY24?
The company has revised its fiscal 2024 net sales forecast to $11.8 billion to $12.1 billion, down from the previous range of $12.2 billion to $12.5 billion.
The company has adjusted its expected range for diluted adjusted earnings per share (EPS) to $1.57 to $1.63, down from the previous range of $1.55 to $1.65.
The fiscal 2024 guidance reflects the impact of production disruptions at the Suffolk, VA facility. Additionally, the company is evaluating the financial effects of storm damage at its Papillion, Nebraska, facility. However, the Transform and Modernize initiative is expected to positively influence earnings.
HRL’s stock has risen 8.3% in the past three months compared with the industry’s growth of 14.8%.
Better-Ranked Food Bets
Here, we have highlighted three better-ranked food stocks, namely, The Chef's Warehouse (CHEF - Free Report) , Pilgrim’s Pride (PPC - Free Report) and Ollie's Bargain Outlet (OLLI - Free Report) .
The Chef’s Warehouse, which engages in the distribution of specialty food products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimated figure for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, currently carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.
The Zacks Consensus Estimated figure for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.1% and 12.71%, respectively, from the year-earlier levels.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings calls for growth of around 1.1% and 4.2%, respectively, from the year-ago reported numbers.