Hormel Foods Stock Down 0.6% on Fiscal Second-Quarter Results



Disappointing numbers

Hormel Foods Corporation (HRL) announced its fiscal second-quarter results today. Its sales of $2.33 billion missed the analyst consensus estimate of $2.36 billion. Adjusted EPS of $0.44 also fell short of estimates of $0.45. HRL was down 0.6% at 7:02 AM EST.

Hormel Foods reiterated its guidance for fiscal 2018. It expects to report sales in the range of $9.7 billion–$10.1 billion and EPS in the range of $1.81–$1.95.

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The quarter in detail

However, on a year-over-year basis, sales were up 6.5%. The company’s Refrigerated segment and International segment reported sales growth of 13.6% and 22.1%, respectively. However, Grocery segment sales were down 1.4% while weakness persisted in the Jennie-O Turkey Store segment with sales declining 4.2%. The Jennie-O Turkey Store segment’s prospects remain challenging as turkey prices show no signs of recovery. Organic net sales were unchanged on a year-over-year basis.

The gross margin was 21.3%, down 100 basis points from the prior quarter. Increases in the cost of goods dragged on the gross margin. Selling, general, and administrative expenses were up 12.6% due to higher advertising expense and acquisitions. The selling, general, and administrative expense rate also increased over 40 basis points to 8.7%. Subsequently, the operating margin was down 130 basis points to 13.1%.

On a year-over-year basis, EPS were up 12.8% to $0.44. Higher revenue and a lower provision for income taxes offset the increase in expenses. Also, share repurchases offered a bit of a cushion. The company repurchased stock worth $45 million on a year-to-date basis.

As of April 29, the company generated cash from operations of $443.3 million, compared with $280.6 million reported in the comparable period last fiscal year.


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