uploads///Hormel Foods Revenue versus Estimates

What Could Benefit Hormel Foods’ Revenue in Fiscal 3Q16?

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Aug. 17 2016, Updated 8:05 a.m. ET

Revenue expectations for 3Q16

Analysts expect revenue of $2.2 billion for Hormel Foods (HRL) in fiscal 3Q16—3% higher than revenue of $2.19 billion in fiscal 3Q15. Analysts expect 4Q16 revenue to be ~$2.5 billion—growth of 7% compared to the same quarter last year. The sales for fiscal 2016 are projected to be ~$9.4 billion—growth of 2% compared to fiscal 2015.

The company plans to benefit from the acquisition of Justin’s LLC announced during the second quarter. Fiscal 2016 is expected to include about four months of results from Justin’s.

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Segment guidance

Hormel Foods expects favorable input costs to benefit the Refrigerated Foods and Grocery Products segments. It expects its fiscal 2016 performance to benefit from these segments. These two segments are expected to drive YoY (year-over-year) gains in sales and operating profits led by growth in value-added products.

Management also expects the Jennie-O Turkey Store to drive sales and earnings growth due to turkey production getting back to normalized levels. The International segment is projected to return to growth in 2H16—driven by export sales of SPAM family of products and Skippy peanut butter.

The Specialty Foods segment is expected to show a decline in YoY sales and earnings—led by the sale of the Diamond Crystal Brands business. To drive revenue growth, Hormel Foods is investing in new advertising campaigns for its products, including Skippy PB Bites, Hormel pepperoni, and Muscle Milk protein products.

Peers

The revenue estimates for Hormel Foods’ peers such as Campbell Soup (CPB), ConAgra Foods (CAG), and General Mills (GIS) are as follows:

  • Campbell Soup’s fiscal 4Q16 revenue is expected to be in line with fiscal 4Q15.
  • ConAgra’s fiscal 1Q17 revenue is expected to fall by 2%.
  • General Mill’s fiscal 1Q17 revenue is expected to fall by 6%.

Hormel also forms 0.55% of the Vanguard Consumer Staples ETF (VDC). The PowerShares S&P 500 Low Volatility Portfolio (SPLV) invests 0.92% of its holdings in Campbell Soup.

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