Earnings from Hormel and Smucker

This morning, we got two more Buy List earnings report. These will be the last reports for quite some time.

Hormel Foods (HRL) said they made 34 cents per share for their fiscal Q3 (ending July 31). That was three cents below Wall Street’s estimate. Sales fell 4.4% to $2.2 billion. For comparison, Hormel made 36 cents per share in last year’s Q3.

So what caused the earnings miss? The major problem is that there’s been a surge in demand for bacon. Normally, that’s a good thing, but Hormel hasn’t been able to catch up with the cost change. Their CEO said that since April, pork belly prices have doubled. Hormel said they probably will not be able to raise prices until October. As a result, the company’s profit margins got squeezed last quarter.

Hormel also had a poor quarter from their Muscle Milk unit which they’ve spent heavily on. Plus, their turkey unit continues to see poor sales. The good news is that Hormel’s grocery store biz, including items like Skippy Peanut Butter, is doing well.

Hormel has also been busy on the M&A front. Last week, the company announced the acquisition of Fontanini Italian Meats and Sausages. This week, they spent $104 million to buy Cidade do Sol, a Brazilian meat company.

Now for guidance. Hormel is lowering their full-year guidance range to $1.54 to $1.58 per share, from the previous range of $1.65 to $1.71 per share. For the first three quarters, Hormel has made $1.17 per share so their guidance means a Q4 range of 37 to 41 cents per share. Wall Street had been expecting 46 cents per share. The shares are currently down 6.6% today.

For their fiscal Q1, JM Smucker (SJM) earned $1.51 per share. That was ten cents below estimates.

The main culprit was SJM’s Folger’s coffee unit. Sales at Folger dropped by 8% while operating profits plunged 29%. The company raised coffee prices earlier this year but then lowered them in July. Smucker’s biggest business, which is pet food, had a sluggish quarter. Sales rose by just 0.5%.

“While our first quarter results fell slightly short of our projections, primarily driven by lower than anticipated volume for Folgers® roast and ground coffee, we have taken actions to improve our competitive positioning for Folgers®. As a result, volume trends are improving. In addition, we remain pleased with the performance of the remainder of our coffee portfolio and look forward to the launch of new coffee products later this fiscal year,” said Mark Smucker, Chief Executive Officer. “We are also pleased with the progress on our cost management programs, as we continue to deliver on our synergy and cost savings targets. Across all our businesses, we are executing on our strategic plan that provides a clear path to sustainable, long-term growth by delivering on current consumer and retail trends.”

Smucker also lowered their full-year forecast. The initial guidance was for $7.85 to $8.05 per share. Now Smucker sees FY 2018 earnings of $7.75 to $7.95 per share.

Posted by on August 24th, 2017 at 11:17 am

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