Hormel Foods Corporation HRL reported its fourth-quarter fiscal 2024 results. Net sales matched the Zacks Consensus Estimate but declined on a year-over-year basis. While the company’s bottom line remained flat compared to the year-ago quarter’s level, it missed the consensus mark.
Hormel Foods’ adjusted earnings of 42 cents per share missed the Zacks Consensus Estimate of 43 cents.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Net sales of $3,138.1 million declined from $3,198.1 million reported in the year-ago quarter. Volumes declined 4.1% in the reported quarter.
Hormel Foods Corporation Price, Consensus and EPS Surprise
Hormel Foods Corporation Price, Consensus and EPS Surprise
Hormel Foods’ gross profit came in at $521.2 million, up from $514.4 million reported in the year-ago quarter.
Selling, general and administrative (SG&A) expenses were $238.6 million for the quarter, an increase from $216.5 million in the year-ago period.
Adjusted operating income was $308 million, a decrease from $313.1 million in the same quarter last year. Adjusted operating margin remained unchanged year over year at 9.8%.
HRL Provides Q4 Revenue & Profit Insights by Segment
Net sales in the Retail unit dropped 3.8% year over year to $1,907.1 million, while volumes fell 6%. Declines in volume and net sales in the Value Added Meats, Snacking & Entertaining, and Convenient Meals & Proteins categories led to a decrease in overall performance. However, this decline was somewhat mitigated by growth in branded products such as Hormel Black Label bacon, Applegate natural and organic meats, the SPAM family, Jennie-O ground turkey and Hormel Square Table entrees. Adjusted segment profit increased by 4%, driven by continued gains from lower logistics costs and additional savings from the Transform and Modernize (T&M) initiative.
Net sales in the Foodservice segment increased 1.3% to $1,046 million, with volumes up 2%. The robust performance was fueled by growth in premium prepared proteins, salty snacks, turkey, bacon and pizza toppings categories. Key products like Hormel Fire Braised meats, Heritage Premium Meats, Jennie-O branded turkey, Planters snack nuts and Cafe H globally inspired proteins contributed to top-line growth. Despite higher sales, segment profit decreased by 8% due to reduced margins in Heritage Premium Meats, poultry and pizza toppings, along with an increase in selling, general and administrative expenses.
Net sales in the International unit increased 1.4% year over year to $185 million, whereas volumes tumbled 10%. The net sales increase was fueled by demand in China and robust branded exports of SPAM luncheon meat and Skippy peanut butter. However, significant volume declines in turkey exports led to lower overall volumes. Segment profit rose significantly year over year, thanks to better export margins, positive performance in China and growth from investments in the Philippines and Indonesia.
Hormel Foods’ Financial Health Snapshot
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $741.9 million and total long-term debt (excluding current maturities) of $2,850.9 million. In the fiscal fourth quarter, cash flow from operations was $408.6 million.
Hormel Foods prioritizes returning capital to its shareholders. The company recently announced a 3% dividend hike, raising the annual rate to $1.16 per share. This marks the 59th consecutive year of annual dividend growth for the company.
As of Nov. 15, 2024, the company paid its 385th consecutive quarterly dividend at an annual rate of $1.13 per share.
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HRL Advancing Growth With T&M Initiative
In fiscal 2024, Hormel Foods made significant progress with its T&M initiative, generating $75 million in operating income benefits. The company anticipates an additional $100 million to $150 million in benefits from the T&M initiative in fiscal 2025 as the program's expansion accelerates value creation. Focused on transforming the supply chain, reducing portfolio complexity and investing in data, technology and processes, the T&M initiative is designed to provide long-term strategic growth for the core business. This initiative plays a crucial role in Hormel's goal of achieving at least $250 million in annualized operating income growth by fiscal 2026.
What to Expect From HRL in FY25
Hormel Foods expects fiscal 2025 net sales to range from $11.9 billion to $12.2 billion, with organic net sales growth projected between 1% and 3%. Management expects all three of its segments to achieve top-line growth by continuing to lead in on-trend categories, boosting brand investments and driving innovation in the marketplace.
The company anticipates operating income to be between $1.13 billion and $1.23 billion, while adjusted operating income is expected to be in the range of $1.18 billion to $1.28 billion in fiscal 2025. The company’s annual earnings per share (EPS) are forecasted to be between $1.51 and $1.65, and adjusted EPS is projected to range from $1.58 to $1.72.
Hormel Foods' fiscal 2025 outlook includes anticipated impacts on net sales and earnings from lower whole-bird turkey commodity markets, particularly in the fiscal first quarter. In addition, the company expects continued net sales and earnings effects from the snack nuts supply disruption in the fiscal first quarter, with sequential improvement from the Planters brand starting in the fiscal second quarter.
Hormel Foods targets capital expenditures of $275 million to $300 million and expects depreciation and amortization expenses of approximately $265 million in fiscal 2025.
HRL’s stock has dropped 0.9% in the past three months against the industry’s growth of 1.5%.
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