Hormel Foods Corporation HRL reported its first-quarter fiscal 2025 results. Net sales and earnings declined year over year. While the company’s bottom line missed the Zacks Consensus Estimate, the top line surpassed the same. Volumes declined across all segments.
Hormel Foods’ adjusted earnings of 35 cents per share declined from 41 cents reported in the year-ago quarter. The metric missed the Zacks Consensus Estimate of 37 cents.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Net sales of $2,988.8 million declined 0.3% from $2,996.9 million reported in the year-ago quarter. However, the metric surpassed the consensus mark of $2939.5 million. Volumes declined 4.2% in the reported quarter.
Hormel Foods Corporation Price, Consensus and EPS Surprise
Hormel Foods Corporation price-consensus-eps-surprise-chart | Hormel Foods Corporation Quote
HRL’s Quarterly Results: Key Metrics & Insights
Hormel Foods’ gross profit came in at $475.2 million, down from $508.7 million reported in the year-ago quarter.
Selling, general and administrative expenses were $263 million for the quarter, an increase from $240.4 million in the year-ago period.
Adjusted operating income was $254 million, a decrease from $294.8 million in the same quarter last year. Adjusted operating margin stood at 8.5%, down from 9.8% reported in the year-ago quarter.
HRL Provides Q1 Revenue & Profit Insights by Segment
Net sales in the Retail unit dropped 1.1% year over year to $1,890.1 million, while volumes fell 3.7%. Reduced sales of snack nuts, impacted by production disruptions at the Suffolk facility, contributed to a year-over-year decline in net sales. Nevertheless, flagship and rising brands experienced growth, driven by robust performance from Applegate natural and organic meats, SPAM brand, Hormel Black Label bacon, Jennie-O ground turkey, Hormel pepperoni and Wholly guacamole.
Segment profit declined by 20%, primarily due to reduced sales and increased raw material costs in the Snacking & Entertaining category, along with elevated input costs and unfavorable whole turkey market conditions. However, these challenges were partially offset by gains from the Transform and Modernize (T&M) initiative and margin growth in the Emerging Brands and Convenient Meals & Proteins segments.
Net sales in the Foodservice segment increased 1.9% to $930.2 million, with volumes down 4.7%. The robust performance was driven by a diverse portfolio of solutions-based products, a strong direct-selling organization and broad channel presence. Volume and net sales growth were driven by growth in premium prepared proteins, premium bacon, turkey and breakfast sausage. Key products, including Hormel Fire Braised meats, Jennie-O turkey items, Cafe H globally inspired proteins and Cure 81 ham, achieved volume and sales growth. Segment profit decreased by 8% due to margin pressures countered by increased sales.
Net sales in the International unit fell 2.4% year over year to $168.5 million, whereas volumes tumbled 6.9%. Robust volume and net sales growth across China, along with increased exports of SPAM luncheon meat, Skippy peanut butter and fresh pork, were offset by weaker demand in Brazil and a decline in commodity turkey exports. Segment profit grew by 4%, driven by higher export margins and growth in China. However, gains were partially offset by weaker performance in Brazil and lower equity in earnings.
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Hormel Foods’ Financial Health Snapshot
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $840.4 million and total long-term debt (excluding current maturities) of $2,850.2 million. In the fiscal first quarter, cash flow from operations was $309.2 million.
Hormel Foods prioritizes returning capital to its shareholders. The company returned nearly $155 million to its shareholders via dividends.
HRL Advancing Growth With T&M Initiative
Hormel Foods advanced its T&M initiative, with key progress in the Move pillar, including preparations for a new Memphis distribution center to improve inventory flow and capacity. In addition, the company divested its last sow farm, reinforcing efforts to reduce commodity exposure and streamline portfolio. The company anticipates $100 million to $150 million in additional benefits from the T&M initiative in fiscal 2025.
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%.
The company now anticipates operating income to be between $1,118 million and $1,212 million, while adjusted operating income is expected to be in the range of $1,175 million to $1,275 million in fiscal 2025. Earlier, it had anticipated operating income to be between $1,129 million and $1,223 billion, while adjusted operating income was expected to be in the range of $1,175 million to $1,275 million.
The company’s annual earnings per share (EPS) are now expected to be between $1.49 and $1.63 compared with the earlier view of $1.51 and $1.65. It continues to expect adjusted EPS in the projected range of $1.58 to $1.72. 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 10.8% in the past three months compared with the industry’s decline of 18.2%.
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The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and EPS implies growth of 0.3% and 2.2%, respectively, from the year-ago numbers.
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Hormel Foods Corporation (HRL) : Free Stock Analysis Report
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