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Can Hormel Foods Keep Expanding Margins Despite Softer Retail Volumes?
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Key Takeaways
HRL began benefiting from lower pork commodity prices in the third quarter, with more gains expected ahead.
HRL faced elevated beef, freight, logistics and fuel costs, plus higher short-term turkey supply-chain costs.
HRL is using pricing, mix, efficiency gains and SG&A actions to improve profitability amid cost pressures.
Hormel Foods Corp. (HRL - Free Report) continues to improve profitability despite softer Retail volumes pressuring sales. In the third quarter of 2026, the company expanded its adjusted operating margin by 60 basis points to 9%, contributing to a 30-basis-point improvement in the first nine months. Adjusted earnings per share increased 6% year over year to 37 cents.
The margin improvement came despite Retail volume declines, driven by business exits, lower whole-bird and private-label snack nut volumes, contract manufacturing and pricing-related elasticity. Consumer takeaway across branded Retail weakened, while total company dollar consumption declined 1% during the quarter compared with approximately 1% growth earlier in the year.
However, Hormel Foods continued to benefit from operational measures supporting profitability across its business. The Foodservice segment delivered another quarter of strong performance, with profit growth outpacing sales growth and driving further margin expansion. Management attributed this performance to disciplined product mix management and a continued focus on profitability. Foodservice remains an important contributor to the company's overall performance.
In addition, the company also began recognizing benefits from lower pork prices, with further benefits expected in future quarters due to cost-recognition timing. Adjusted SG&A expenses, as a percentage of net sales, improved year over year due to lower employee-related expenses and the timing of marketing and advertising investments. The company remains focused on cost discipline and prioritizing high-return SG&A investments.
Overall, continued strength in Foodservice, benefits from lower pork costs and disciplined expense management could help Hormel Foods sustain margin improvement while it works to stabilize Retail volumes and support overall profitability.
The Zacks Rundown for HRL
This Zacks Rank #4 (Sell) company’s shares have lost 21.1% in the past three months compared with the industry’s 13.9% decline.
Image Source: Zacks Investment Research
From a valuation standpoint, HRL trades at a forward price-to-earnings ratio of 12.58, lower than the industry’s average of 13.46.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HRL’s current and next fiscal year earnings implies a year-over-year increase of 8% and 3.6%, respectively.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
The Chef’s Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East, and Canada. CHEF currently carries a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current fiscal-year sales and earnings indicates growth of 10.8% and 33.7%, respectively, from the year-ago reported figures. CHEF delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Mama’s Creations, Inc. (MAMA - Free Report) , together with its subsidiaries, manufactures and markets fresh deli-prepared foods in the United States. MAMA currently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for MAMA's current fiscal-year sales & earnings implies growth of 30.3% and 66.7%, respectively, from the year-ago actuals. MAMA delivered a trailing four-quarter negative earnings surprise of 121.7%, on average.
Medifast, Inc. (MED - Free Report) operates as a health and wellness company that provides habit-based and coach-guided lifestyle solutions to address obesity and support a healthy life in the United States. MED currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for MED's current fiscal-year sales and earnings implies a decline of 10.8% and 33.7%, respectively, from the year-ago actuals. MED delivered a trailing four-quarter negative earnings surprise of 462.2%, on average.
View the Zacks #1 Rank List
Image: Bigstock
Can Hormel Foods Keep Expanding Margins Despite Softer Retail Volumes?
Key Takeaways
Hormel Foods Corp. (HRL - Free Report) continues to improve profitability despite softer Retail volumes pressuring sales. In the third quarter of 2026, the company expanded its adjusted operating margin by 60 basis points to 9%, contributing to a 30-basis-point improvement in the first nine months. Adjusted earnings per share increased 6% year over year to 37 cents.
The margin improvement came despite Retail volume declines, driven by business exits, lower whole-bird and private-label snack nut volumes, contract manufacturing and pricing-related elasticity. Consumer takeaway across branded Retail weakened, while total company dollar consumption declined 1% during the quarter compared with approximately 1% growth earlier in the year.
However, Hormel Foods continued to benefit from operational measures supporting profitability across its business. The Foodservice segment delivered another quarter of strong performance, with profit growth outpacing sales growth and driving further margin expansion. Management attributed this performance to disciplined product mix management and a continued focus on profitability. Foodservice remains an important contributor to the company's overall performance.
In addition, the company also began recognizing benefits from lower pork prices, with further benefits expected in future quarters due to cost-recognition timing. Adjusted SG&A expenses, as a percentage of net sales, improved year over year due to lower employee-related expenses and the timing of marketing and advertising investments. The company remains focused on cost discipline and prioritizing high-return SG&A investments.
Overall, continued strength in Foodservice, benefits from lower pork costs and disciplined expense management could help Hormel Foods sustain margin improvement while it works to stabilize Retail volumes and support overall profitability.
The Zacks Rundown for HRL
This Zacks Rank #4 (Sell) company’s shares have lost 21.1% in the past three months compared with the industry’s 13.9% decline.
Image Source: Zacks Investment Research
From a valuation standpoint, HRL trades at a forward price-to-earnings ratio of 12.58, lower than the industry’s average of 13.46.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HRL’s current and next fiscal year earnings implies a year-over-year increase of 8% and 3.6%, respectively.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
The Chef’s Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East, and Canada. CHEF currently carries a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current fiscal-year sales and earnings indicates growth of 10.8% and 33.7%, respectively, from the year-ago reported figures. CHEF delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Mama’s Creations, Inc. (MAMA - Free Report) , together with its subsidiaries, manufactures and markets fresh deli-prepared foods in the United States. MAMA currently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for MAMA's current fiscal-year sales & earnings implies growth of 30.3% and 66.7%, respectively, from the year-ago actuals. MAMA delivered a trailing four-quarter negative earnings surprise of 121.7%, on average.
Medifast, Inc. (MED - Free Report) operates as a health and wellness company that provides habit-based and coach-guided lifestyle solutions to address obesity and support a healthy life in the United States. MED currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for MED's current fiscal-year sales and earnings implies a decline of 10.8% and 33.7%, respectively, from the year-ago actuals. MED delivered a trailing four-quarter negative earnings surprise of 462.2%, on average.