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Hormel Foods (HRL) Stock Dips on Q3 Earnings & Sales Miss
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Shares of Hormel Foods Corporation (HRL - Free Report) fell nearly 3%, following the soft results in the third quarter of fiscal 2023, as the top and bottom lines lagged the Zacks Consensus Estimate. Results gained from volume growth across all our segments, driven by improvement in turkey, robust demand for many of foodservice items, and growth from leading retail brands, including SPAM, Hormel Black Label, Planters and Hormel pepperoni.
Reduced inventory, strength in the Planters snack nuts business and adjusted operating margin improvement bode well. The company gained from brand investments and continued supply-chain improvement.
Quarter in Detail
Hormel Foods’ earnings of 40 cents per share lagged the Zacks Consensus Estimate of 41 cents. However, the metric came in line with the year-ago quarter’s reported figure.
Net sales in the quarter were $2,963.3 million, missing the Zacks Consensus Estimate of $3,108 million. The top line decreased 2.3% from the $3,034.4 million reported in the year-ago quarter.
The gross profit declined 1.6% year over year to $498 million, lagging our estimate of $501.8 million. SG&A expenses edged down 0.5% to $221.1 million, missing our estimate of $222 million. Advertising spending amounted to $43 million in the third quarter of fiscal 2023 compared with $37 million last year.
Hormel Foods’ operating income fell 1.5% to $286.8 million and lagged our estimate of $292 million. The operating margin came in at 9.7% in the quarter under review.
Hormel Foods Corporation Price, Consensus and EPS Surprise
Net sales in the Retail unit decreased 1.7% year over year to $1,891.7 million and missed estimates of $1,989.1 million. This was mainly due to high levels of demand for Skippy spreads last year and lower market-driven pricing on raw bacon items. Volumes in the segment inched up 1%. The segmental profit went down 7% in the quarter.
Net sales in the Foodservice segment fell 3% to $890.9 million and lagged our estimate of $959.6 million. The decline in net sales can be somewhat attributed to lower net pricing in certain categories, such as bacon, reflecting raw material commodity deflation. Meanwhile, volumes rose 2%. The segmental profit went up 14% in the quarter.
Net sales in the International unit fell 6% year over year to $180.6 million but came below our estimate of $197.6 million. This can be attributable to reduced branded export sales and lower results in China. On the flip side, Foodservice sales in China improved sequentially. Also, strength in the Skippy and Planters brands, strong volume growth stemming from low-margin commodity fresh pork and turkey exports, bodes well. However, volumes in the segment grew 10%. The segmental profit went down 50%.
Financial Details
The company ended the quarter with cash and cash equivalents of $669.1 million, and long-term debt, less current maturities, of $2,360.4 million.
In the quarter that ended Jul 30, 2023, net cash provided by operating activities was $317 million, and capital expenditure totaled $78 million. Management expects to incur a capital expenditure of $280 million in fiscal 2023.
Guidance
Hormel Foods projects fourth-quarter net sales growth of $3.1-$3.6 billion, in sync with our estimate of $3.5 billion. Fiscal 2023 sales are anticipated to be down 4% to flat year over year, compared with our estimate of 1% growth. The fiscal fourth-quarter bottom line is envisioned to decline year over year due to continued weakness in the International segment and lower Retail segmental results. Fiscal 2023 adjusted earnings are expected to be $1.61-$1.67, whereas our estimate is pegged at $1.71.
The company predicts modest volume growth for the fiscal fourth quarter, driven by growth from the Foodservice segment, continued recovery in turkey and improved fill rates in key categories.
HRL also estimates its Foodservice segment to end the year on a solid note. It expects incremental savings from a series of projects aimed at reducing costs and further synergies from the implementation of GoFWD.
However, continued softness in its International segment and earnings pressure from heightened competition at retail are likely to act as headwinds.
Image Source: Zacks Investment Research
Shares of this Zacks Rank #3 (Hold) company have gained 4.4% in the past three months compared with the industry’s growth of 5.2%.
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.
The J. M. Smucker Company (SJM - Free Report) , which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 14% on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year earnings suggests growth of 6.8% from the year-ago reported figure.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks, carrying a Zacks Rank #2. UTZ’s expected EPS growth rate for three to five years is 11.4%.
The Zacks Consensus Estimate for Utz Brands’ current fiscal year sales suggests growth of 3.7% from the year-ago reported numbers. UTZ has a trailing four-quarter earnings surprise of 12.3% on average.
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Hormel Foods (HRL) Stock Dips on Q3 Earnings & Sales Miss
Shares of Hormel Foods Corporation (HRL - Free Report) fell nearly 3%, following the soft results in the third quarter of fiscal 2023, as the top and bottom lines lagged the Zacks Consensus Estimate. Results gained from volume growth across all our segments, driven by improvement in turkey, robust demand for many of foodservice items, and growth from leading retail brands, including SPAM, Hormel Black Label, Planters and Hormel pepperoni.
Reduced inventory, strength in the Planters snack nuts business and adjusted operating margin improvement bode well. The company gained from brand investments and continued supply-chain improvement.
Quarter in Detail
Hormel Foods’ earnings of 40 cents per share lagged the Zacks Consensus Estimate of 41 cents. However, the metric came in line with the year-ago quarter’s reported figure.
Net sales in the quarter were $2,963.3 million, missing the Zacks Consensus Estimate of $3,108 million. The top line decreased 2.3% from the $3,034.4 million reported in the year-ago quarter.
The gross profit declined 1.6% year over year to $498 million, lagging our estimate of $501.8 million. SG&A expenses edged down 0.5% to $221.1 million, missing our estimate of $222 million. Advertising spending amounted to $43 million in the third quarter of fiscal 2023 compared with $37 million last year.
Hormel Foods’ operating income fell 1.5% to $286.8 million and lagged our estimate of $292 million. The operating margin came in at 9.7% in the quarter under review.
Hormel Foods Corporation Price, Consensus and EPS Surprise
Hormel Foods Corporation price-consensus-eps-surprise-chart | Hormel Foods Corporation Quote
Segmental Details
Net sales in the Retail unit decreased 1.7% year over year to $1,891.7 million and missed estimates of $1,989.1 million. This was mainly due to high levels of demand for Skippy spreads last year and lower market-driven pricing on raw bacon items. Volumes in the segment inched up 1%. The segmental profit went down 7% in the quarter.
Net sales in the Foodservice segment fell 3% to $890.9 million and lagged our estimate of $959.6 million. The decline in net sales can be somewhat attributed to lower net pricing in certain categories, such as bacon, reflecting raw material commodity deflation. Meanwhile, volumes rose 2%. The segmental profit went up 14% in the quarter.
Net sales in the International unit fell 6% year over year to $180.6 million but came below our estimate of $197.6 million. This can be attributable to reduced branded export sales and lower results in China. On the flip side, Foodservice sales in China improved sequentially. Also, strength in the Skippy and Planters brands, strong volume growth stemming from low-margin commodity fresh pork and turkey exports, bodes well. However, volumes in the segment grew 10%. The segmental profit went down 50%.
Financial Details
The company ended the quarter with cash and cash equivalents of $669.1 million, and long-term debt, less current maturities, of $2,360.4 million.
In the quarter that ended Jul 30, 2023, net cash provided by operating activities was $317 million, and capital expenditure totaled $78 million. Management expects to incur a capital expenditure of $280 million in fiscal 2023.
Guidance
Hormel Foods projects fourth-quarter net sales growth of $3.1-$3.6 billion, in sync with our estimate of $3.5 billion. Fiscal 2023 sales are anticipated to be down 4% to flat year over year, compared with our estimate of 1% growth. The fiscal fourth-quarter bottom line is envisioned to decline year over year due to continued weakness in the International segment and lower Retail segmental results. Fiscal 2023 adjusted earnings are expected to be $1.61-$1.67, whereas our estimate is pegged at $1.71.
The company predicts modest volume growth for the fiscal fourth quarter, driven by growth from the Foodservice segment, continued recovery in turkey and improved fill rates in key categories.
HRL also estimates its Foodservice segment to end the year on a solid note. It expects incremental savings from a series of projects aimed at reducing costs and further synergies from the implementation of GoFWD.
However, continued softness in its International segment and earnings pressure from heightened competition at retail are likely to act as headwinds.
Image Source: Zacks Investment Research
Shares of this Zacks Rank #3 (Hold) company have gained 4.4% in the past three months compared with the industry’s growth of 5.2%.
Stocks to Consider
Flowers Foods (FLO - Free Report) emphasizes providing high-quality baked items. The company currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 2.3%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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.
The J. M. Smucker Company (SJM - Free Report) , which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 14% on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year earnings suggests growth of 6.8% from the year-ago reported figure.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks, carrying a Zacks Rank #2. UTZ’s expected EPS growth rate for three to five years is 11.4%.
The Zacks Consensus Estimate for Utz Brands’ current fiscal year sales suggests growth of 3.7% from the year-ago reported numbers. UTZ has a trailing four-quarter earnings surprise of 12.3% on average.