Hormel Foods Beats Estimates by Three Cents

This morning, Hormel Foods (HRL) reported fiscal Q3 earnings of 37 cents per share. That beat Wall Street’s estimate of 34 cents per share. This was for the quarter that ended on July 31.

Looking at the numbers, this was a solid quarter for the Spam folks. Overall sales rose 4% to $2.4 billion. Sales volume also rose by 4%. That’s important because you don’t want to rely on price increases. Hormel’s operating free cash flow rose 72% to $242 million. That’s a good sign.

CEO Jim Snee said:

“We had an excellent third quarter with strength across our retail and deli businesses, along with a rebound in our foodservice business,” said Jim Snee , chairman of the board, president and chief executive officer. “The intentional balance we have built across our portfolio has once again enabled us to generate stable cash flows in a very dynamic time period, even as we absorbed significant incremental costs in our supply chain due to the COVID-19 pandemic.”

Here’s how the quarter broke down by Hormel’s different business units:

Refrigerated Foods
Volume up 8%; organic volume up 7%
Net sales up 5%; organic net sales up 2%
Segment profit down 11%

Grocery Products
Volume up 6%
Net sales up 7%
Segment profit up 36%

Jennie-O Turkey Store
Volume down 9%
Net sales down 4%
Segment profit down 67%

International & Other
Volume down 5%
Net sales up 2%
Segment profit up 26%

Hormel still has a solid balance sheet. Their cash on hand is up to $1.7 billion. That’s up from $0.7 billion a year ago. That’s due to the bond offering and also halting share buybacks. Total debt is up to $1.3 billion from $0.3 billion a year ago.

For Hormel’s outlook, Snee said he expects to see the current quarter mirror the strength of Q3, but he was cautious to add that it’s an uncertain environment. He also said he expects to food service post a year-over-year decrease for Q4.

The stock is down today but that’s after a pretty nice run.

Posted by on August 25th, 2020 at 8:30 am


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