Hormel Foods Corporation Reports Q3 2024 Results

Hormel Foods Corporation (NYSE: HRL), a leading food company, reported solid third-quarter results for fiscal 2024, with its core business showing healthy growth and retail brands outperforming their categories.

The company’s Foodservice segment continued its above-industry sales growth trend, while the International segment saw a significant recovery. However, challenges persisted in the turkey market and with production disruptions at the Planters facility.

Hormel has updated its fiscal 2024 net sales guidance and narrowed its earnings guidance range, reflecting both headwinds and strategic growth investments.

Key Takeaways

• Hormel Foods Corporation’s retail brands, including Hormel Black Label bacon, Jennie-O turkey, and SPAM luncheon meat, experienced sales growth.
• The Foodservice segment recorded its fifth consecutive quarter of above-industry sales growth.
• The International segment showed recovery with strong branded exports, despite a decrease in commodity exports.
• Hormel faces ongoing challenges in the turkey market and with production disruptions at its Planters facility.
• The company has updated its fiscal 2024 net sales and earnings guidance, reflecting current market conditions and strategic investments.

Company Outlook

• Hormel expects continued momentum in its retail segment, supported by strategic trade and advertising investments.
• The Foodservice segment is anticipated to maintain volume and sales growth, led by key product categories.
• The company is optimistic about the rebound of the Planters brand and growth in the international business.
• Hormel is focused on optimizing its portfolio and avoiding sales of non-strategic items at negative margins.
• A comprehensive update on the transform and modernize initiatives will be provided in the fourth-quarter earnings call.

Bearish Highlights

• The company adjusted its net sales guidance due to challenges such as commodity market conditions and production disruptions.
• There is ongoing softness in the contract manufacturing business.
• The turkey market remains dynamic with several unknown factors impacting performance.

Bullish Highlights

• Hormel’s core business remains healthy with retail brands outperforming their categories.
• The Foodservice segment is on track for a record year.
• The company expects to achieve a target of $250 million in EBIT improvement by 2026.

Misses

• The company is experiencing a commercial impact due to lower sales at Planters, although no distribution losses have occurred.
• The exact spillover into 2025 from current challenges is uncertain.

Q&A Highlights

• Hormel discussed financial achievements and plans for 2025, emphasizing procurement savings, logistics improvements, and enhanced service levels.
• They expect Q4 retail business sales to be down mid-single digits, food service to be up mid-single digits, and international sales to be in the low single digits.
• The company is committed to finishing the year strong despite identified headwinds.

In summary, Hormel Foods Corporation has demonstrated resilience in its core business amidst a mix of challenges and growth opportunities. The company remains committed to its long-term growth strategy and is making strategic investments to support key areas. Investors can look forward to more details on Hormel’s initiatives in the upcoming fourth-quarter earnings call.

InvestingPro Insights

Hormel Foods Corporation (NYSE: HRL) has shown a robust track record of stability and growth, which is reflected in its recent financial metrics and InvestingPro Tips.
The company’s dedication to maintaining and increasing its dividend is noteworthy, with a history of raising its dividend for 31 consecutive years and maintaining payments for 54 years. This commitment to shareholder returns is a strong signal of financial health and a conservative fiscal approach.

From a financial perspective, Hormel’s market capitalization stands at approximately $16.99 billion, with a Price to Earnings (P/E) ratio of 22, indicating investors may expect steady earnings. The company’s revenue in the last twelve months as of Q2 2024 was $12.05 billion, despite a slight decrease in revenue growth of -1.8%. Additionally, Hormel’s gross profit margin during the same period was 16.84%, reflecting some of the challenges in maintaining higher profitability in a competitive food industry.

An InvestingPro Tip that resonates with the company’s current state is its ability to manage debt effectively. Hormel operates with a moderate level of debt and its liquid assets exceed short-term obligations, which suggests financial stability and the capacity to navigate through market uncertainties.

For investors seeking a deeper dive into Hormel’s financials and future outlook, InvestingPro offers additional tips and data points. Currently, there are 9 more InvestingPro Tips available for Hormel, providing a comprehensive analysis for those interested in the company’s investment potential.

Investors looking for more insights on Hormel Foods Corporation can explore these aspects further on InvestingPro, which includes a fair value estimate of $39.77, above the previous close price of $33.14. This suggests that, according to InvestingPro’s metrics, Hormel’s stock may be undervalued, presenting a potential opportunity for investors. The next earnings date is set for September 4, 2024, which will provide further clarity on the company’s performance and strategic initiatives.