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Hormel Foods (HRL) Q1 Earnings & Sales Beat on Brand Strength

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Hormel Foods Corporation HRL posted impressive first-quarter fiscal 2022 results, with the top and the bottom line increasing year over year. Net sales and earnings surpassed the respective Zacks Consensus Estimate. This marked the fifth consecutive quarter of net sales growth. Brand strength, particularly in Columbus, WHOLLY, Applegate, Hormel Gatherings, SPAM and Planters, improved the foodservice business, higher pricing, better promotions as well as solid performances in the Refrigerated Foods and the Jennie-O Turkey Store businesses aided results. However, supply chain and significant labor shortages acted as deterrents.

During the fiscal first quarter, Hormel Foods concluded the integration of the Planters and Corn Nuts businesses, which is expected to generate synergies and improve customer service levels. HRL also remains on track to close the Benson Avenue production facility within the second quarter of fiscal 2022. Also, HRL intends to integrate the Jennie-O Turkey Store supply chain into the broader supply chain by the beginning of fiscal 2023.

Shares of Hormel Foods have gained 14.1% in the past three months compared with the industry’s growth of 5.8%.

Quarter in Detail

Earnings of 44 cents per share came ahead of the Zacks Consensus Estimate of 43 cents. The metric increased 7.3% from the year-ago quarter’s reported figure.

Net sales in the quarter were $3,044.4 million, surpassing the Zacks Consensus Estimate of $2,876 million. The top line increased 24% year over year, while organic net sales were up 13%. Net sales increased across all segments and channels. Volumes were 1.2 billion lbs, up 2% year over year. Organic volume fell 4%.

Channel wise, net sales across U.S. Retail and U.S. Foodservice moved up 17% and 51% each year over year while International sales fell 3% year over year in the quarter.

Selling, general and administrative expenses rose to $226 million from $196.4 million reported in the year-ago quarter. Operating income came in at $319.7 million, up 19%. Operating margin of 10.5% contracted 40 bps in the reported quarter.

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Segment Details

Net sales in the Grocery Products unit increased 48.1%, while organic net sales were up 7% year over year. Volumes were up 22%, while organic volume was up 1%. Net sales were driven by the inclusion of the Planters snack nuts business, growth in the simple meals and Mexican foods portfolios. Brands like SPAM, Dinty, Moore, Wholly and Mary Kitchen delivered a solid performance. Profits in the unit moved up 8%.

Net sales in the Jennie-O Turkey Store segment rallied 15.3%, while volumes dipped 3%. Sales increased on the back of continued recovery in foodservice, rise in whole bird shipments and improved prices across the portfolio. Volumes were affected by labor shortage. However, the segmental profit surged 62%

Net sales in the Refrigerated Foods unit rose 19.1% year over year. Organic net sales in the segment increased 17%. Volumes decreased 4%. Net sales were backed by an improved foodservice industry and various pricing actions across majority of the categories. The segmental profit moved up 15%.

International & Other net sales slid 3.5%, while organic net sales declined 6%. Volumes were down 17%, while organic volumes fell 19%. Sales were hurt by weak demand in China, stemming from the COVID-related restrictions, current export logistics challenges and a reduced fresh pork export volume. Profits in the unit decreased 19%.

Financial Details

HRL ended the quarter with cash and cash equivalents of $824.4 million. Long-term debt less current maturities came in at $3,309.2 million. In the fiscal first quarter (ended Jan 30, 2022), Hormel Foods generated cash of $383.8 million from operating activities. The currently Zacks Rank #4 (Sell) player expects to incur capital expenditures of $310 million in fiscal 2022.

Hormel Foods Corporation Price, Consensus and EPS Surprise

Hormel Foods Corporation Price, Consensus and EPS Surprise
Hormel Foods Corporation Price, Consensus and EPS Surprise

Hormel Foods Corporation price-consensus-eps-surprise-chart | Hormel Foods Corporation Quote

Outlook

Going into fiscal 2022, management expects favorable demand, pricing actions and continued growth in Columbus charcuterie, Applegate natural and organic meats, Planters snack nuts and foodservice businesses to offset inflationary pressures. HRL projects fiscal 2022 net sales in the range of $11.7-$12.5 billion. Earnings per share (EPS) are envisioned in the range of $1.87-$2.03 in fiscal 2022.

How Other Stocks Fared

Some better-ranked stocks in the Consumer Staples sector are Inter Parfums IPAR, Tyson Foods TSN and Albertsons Companies ACI.

Inter Parfums currently sports a Zacks Rank #1 (Strong Buy). IPAR has a trailing four-quarter earnings surprise of 29.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and EPS suggests growth of 63.2% and 117.4%, respectively, from the corresponding year-ago period’s reported figures.

Tyson Foods, one of the leading producers, distributors and marketers of chicken, beef, pork as well as prepared foods, currently has a Zacks Rank of 1. TSN has a trailing four-quarter earnings surprise of 32.2%, on average.

The Zacks Consensus Estimate for Tyson’s current financial-year sales and earnings suggests growth of 9.5% and 2.9%, respectively, from the corresponding year-ago period’s actuals.

Albertsons Companies currently flaunts a Zacks Rank #1. ACI has a trailing four-quarter earnings surprise of 31.8%, on average.

The Zacks Consensus Estimate for Albertsons Companies’ current financial-year sales suggests growth of 1.6% while the same for EPS implies a decline of roughly 9% from the corresponding year-ago period’s reported numbers.


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