Hormel Foods Earns 37 Cents per Share

This morning Hormel Foods (HRL) reported fiscal Q3 earnings of 37 cents per share. The company also reiterated their full-year guidance of $1.71 to $1.85 per share.

Hormel has already made $1.33 per share for the first three quarters. That means they expect 38 to 52 cents per share for Q4. Wall Street had been expecting 45 cents per share.

EXECUTIVE SUMMARY

Volume of 1.1 billion lbs., down 4%; organic volume1 down 1%
Net sales of $2.3 billion, down 3%; organic net sales1 flat
Pretax earnings of $261 million, up 1%
Operating margin of 11.2% compared to 10.9% last year
Effective tax rate of 23.6% compared to 18.4% last year
Diluted earnings per share of $0.37, down 5% due to a higher effective tax rate
Year-to-date cash flow from operations of $573 million, down 23% due to higher working capital
Fiscal 2019 earnings guidance reaffirmed at $1.71 to $1.85 per share

COMMENTARY

“We delivered earnings in line with our expectations this quarter as our experienced management team reacted quickly and appropriately to rapidly changing market conditions,” said Jim Snee, chairman of the board, president and chief executive officer. “Disciplined pricing, strategic promotional activity, effective advertising and insight-led innovation all played a positive role in our performance. The fundamentals of our company are strong, and we remain focused on delivering our key results as we navigate near-term commodity market uncertainty.”

“Innovative branded product lines such as Hormel® Bacon 1™ cooked bacon, Hormel® Fire Braised™ products, SKIPPY® P.B. & Jelly Minis, and Herdez® salsas all delivered strong sales growth,” Snee said. “Our team also grew sales across many core brands such as SPAM®, Dinty Moore®, Mary Kitchen® and Old Smokehouse®.”

“Double-digit earnings growth in Refrigerated Foods offset weaker results in Grocery Products,” Snee said. “Refrigerated Foods effectively managed sales growth and profitability in the midst of volatile input costs caused by African swine fever. Many of our established brands in Grocery Products continue to outpace center store growth. However, the disappointing bottom-line performance for Grocery Products was driven by higher avocado costs in our MegaMex joint venture and lower results for our SKIPPY® peanut butter spreads business.”

“The Jennie-O Turkey Store team is working diligently to regain lean ground turkey distribution following the two voluntary product recalls,” Snee said. “Our International team made progress growing the SPAM® and SKIPPY® brands in China while U.S. exports continue to be impacted by global trade uncertainty.”

OUTLOOK

“We are reaffirming our fiscal 2019 earnings guidance range,” Snee said. “While we have yet to see sustained higher pork prices due to African swine fever, we have seen input cost volatility and are expecting further volatility. The Refrigerated Foods team has proven its ability to operate in various market conditions with a continued focus on value-added growth, disciplined pricing and innovation. Earnings pressure from higher avocado prices and peanut butter category dynamics will continue to impact results in Grocery Products in the fourth quarter.”

“Our experienced management team will continue to leverage our company’s long-term strategy of building brands, innovating, making strategic acquisitions and increasing balance in our business to deliver long-term growth,” Snee said.

Posted by on August 22nd, 2019 at 12:43 pm


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