Hormel Foods Earns 51 Cents per Share

Hormel Foods (HRL), a leading global branded food company, today reported results for the fourth quarter of fiscal 2018. All comparisons are to the fourth quarter of fiscal 2017 unless otherwise noted.

EXECUTIVE SUMMARY – FISCAL 2018

Record diluted earnings per share of $1.86, up 18% from 2017 EPS of $1.57
Excluding a non-cash impairment, adjusted diluted earnings per share1 of $1.89, up 20%
Record cash flow from operations of $1.24 billion, up 20%
Volume of 4.80 billion lbs., up 1%; organic volume1 down 1%
Record net sales of $9.55 billion, up 4%; organic net sales1 down 1%
Operating margin of 12.6% compared to 14.0% last year
Effective tax rate of 14.3% compared to 33.7% last year

EXECUTIVE SUMMARY – FOURTH QUARTER

Record diluted earnings per share of $0.48, up 17% from 2017 EPS of $0.41
Adjusted diluted earnings per share1 of $0.51, up 24%
Volume of 1.27 billion lbs., down 1%; organic volume1 down 3%
Net sales of $2.52 billion, up 1%; organic net sales1 down 3%
Operating margin of 12.8% compared to 13.2% last year
Effective tax rate of 18.7% compared to 33.8% last year

FISCAL 2019 OUTLOOK

“Fiscal 2019 is a continuation of our long-term evolution as a global branded food company,” said Jim Snee, chairman of the board, president, and chief executive officer. “Our focus on building brands, delivering meaningful innovation to the marketplace, making strategic acquisitions, and creating intentional balance will ensure we are able to meet our growth goals. We are confident in our plan to deliver growth in each business segment in 2019.”

“We anticipate another year of strong cash flows. We plan to reinvest to expand capacity for branded value-added products while returning cash back to shareholders through a 12 percent dividend increase,” Snee said. “This coming year will require strong execution from every business unit in order to manage through commodity market volatility and global trade uncertainty. I know our team is up to the challenge.”

“Growth from leading brands such as Wholly Guacamole®, Applegate®, Jennie-O®, and SPAM® will be important to our success in 2019,” Snee said. “We expect continued growth from our many new innovative items such as Herdez® guacamole salsa, Hormel® Bacon 1™ fully cooked bacon, Hormel® Natural Choice® products, and Hormel® Fire Braised™ meats.”

Fiscal 2019 Outlook

Net Sales Guidance (in billions)

$9.70 – $10.20

Earnings per Share Guidance

$1.77 – $1.91

The following items are included in the company’s guidance range. The company plans to deliver $75 million in cost reductions in 2019 which excludes any planned synergies from recent acquisitions. The company will use the savings to help offset inflation, reinvest into key brands, and contribute to earnings growth. The company also expects to complete the Fremont divestiture in December 2018, incurring approximately $12 million in expenses. This transaction reduces earnings volatility and decreases the company’s reliance on commodity profits.

DIVIDENDS

“This morning we announced a 12 percent increase to our annual dividend, making the new dividend $0.84 per share,” Snee said. “This is the 53rd consecutive year in which we’ve increased our dividend and the 10th consecutive year of double-digit increases. This demonstrates the confidence we have in our business going forward.”

Effective November 15, 2018, the company paid its 361st consecutive quarterly dividend at the annual rate of $0.75 per share.

COMMENTARY – FOURTH QUARTER

“Our team delivered a record quarter of earnings,” Snee said. “Refrigerated Foods had a particularly solid quarter led by value-added growth in retail, deli, and foodservice channels which offset a continued decline in commodity profits.”

“We reached many milestones this quarter including the startup of two new lines to support growth of Hormel® Fire Braised™ products and Hormel® Bacon 1™ fully cooked bacon,” Snee said. “We also announced expansions at our Burke manufacturing facility in Nevada, Iowa, and our Fontanini plant in McCook, Ill. These expansions will allow us to continue growing our pizza toppings business as well as our line of authentic premium Italian meats and sausages. These strategic investments reinforce the strength we are seeing in our value-added businesses.”

Posted by on November 20th, 2018 at 8:16 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.