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Hormel Foods' (HRL) Q4 Earnings Beat Estimates, Sales Increase

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Hormel Foods Corporation HRL posted impressive fourth-quarter fiscal 2021 results, with the top and the bottom line increasing year over year. Net sales and earnings surpassed the Zacks Consensus Estimate. The company saw growth across all segments and channels in the quarter.

Quarter in Detail

Earnings of 51 cents per share came ahead of the Zacks Consensus Estimate of 50 cents per share. The metric increased 19% from the year-ago quarter’s reported figure.

Net sales in the quarter were $3,454.8 million, surpassing the Zacks Consensus Estimate of $3,238.6 million. The top line increased 43% year over year, while organic net sales were up 32%. Net sales increased across all segments and channels. Volumes were 1.4 billion lbs, up 14% year on year. Organic volume rose 8%.

Channel-wise, net sales across U.S. Retail, U.S. Foodservice, U.S. Deli and International moved up 34%, 72%, 24% and 34%, year over year, respectively, in the quarter.

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

Selling, general and administrative expenses rose to $230.4 million from $190.8 million reported in the year-ago quarter. Operating income came in at $358 million, up 29%. Operating margin of 10.4% declined from 11.4% reported in the year-ago quarter.

Segment Details

Net sales in the Grocery Products unit increased 56%,while organic net sales were up 18% year over year. Volumes were up 27%, while organic volume was up 9%. Net sales were driven by the inclusion of the Planters snack nuts business, improved pricing and organic volume growth. Brands like SPAM, Hormel Compleats, Wholly as well as SKIPPY delivered solid performance. Profits in the unit moved up 36%.

Net sales in the Jennie-O Turkey Store segment rallied 23%,while volumes rose 1%.Volume and sales increased on the back of continued recovery in foodservice, solid demand for Jennie-O retail items along with improved prices across the portfolio. These were more than offset by adverse impact from whole bird shipments at the start of the year. However, segment profit tanked 7%.

Net sales in the company’s Refrigerated Foods unit rose 44% year over year. Organic net sales in the segment increased 41%. Volumes in the segment increased 15%. Net sales were backed by continued recovery in the foodservice industry, various pricing actions and solid demand. Segment profit moved up 25%.

International & Other net sales increased 28%, while organic net sales rallied 24%. Volumes were down 4%, while organic volumes fell 6%. Sales were backed by solid demand, improved prices for branded exports and better results in China. Profits in the unit increased 16%.

Other Details

The Zacks Rank #2 (Buy) company ended the quarter with cash and cash equivalents of $613.5 million. Long-term debt - less current maturities came in at $3,315.1 million. In the fourth quarter ended Oct 31, 2021, Hormel Foods generated cash of $564.1 million from operating activities.

On Nov 15, 2021, the company paid out its 373rd straight quarterly dividend at an annual rate of 98 cents per share. Recently, management announced a 6% increase in its annual dividend to $1.04 per share, representing its 56th consecutive year of a dividend hike. The company expects to incur capital expenditures of $310 million in fiscal 2022.

Outlook

Hormel Foods expects all four units to deliver sales and earnings growth in fiscal 2022. Strength in the Planters snack nuts business, as well as organic growth in every segment is likely to contribute to the upside. Management projects fiscal 2022 net sales in the range of $11.7-$12.5 billion in fiscal 2022. Earnings per share (EPS) are envisioned in the range of $1.87-$2.03 in fiscal 2022.

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Shares of company have inched up 1.1% in the past three months compared with the industry’s growth of 0.9%.

3 Appetizing Picks

Some other top-ranked stocks are MGP Ingredients MGPI, The Hain Celestial Group HAIN and The J. M. Smucker Co. SJM.

MGP Ingredients, the producer and supplier of distilled spirits, and specialty wheat proteins and starch food ingredients, currently sports a Zacks Rank #1 (Strong Buy). Shares of the company have dropped 3.8% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and EPS suggests growth of 55.5% and 61.4%, respectively, from the year-ago period’s reported figures. MGPI has a trailing four-quarter earnings surprise of 117.6%, on average.

The Hain Celestial, which provides various natural and organic foods as well as personal care products in North America and Europe, carries a Zacks Rank #2 (Buy) at present. HAIN has a trailing four-quarter earnings surprise of 9.7%, on average. Shares of the company have moved up 0.9% in the past three months.

The Zacks Consensus Estimate for The Hain Celestial’s current financial-year EPS suggests growth of 14.5% from the year-ago period’s reported number.

The J. M. Smucker is a leading marketer and manufacturer of consumer food and beverage products, and pet food and pet snacks in North America. It currently carries a Zacks Rank #2. SJM has a trailing four-quarter earnings surprise of 10.8%, on average. Shares of the company have gained 7.3% in the past three months.

The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year sales suggests growth of 0.1% from the year-ago period’s reported figures. SJM has an expected EPS growth rate of 1.2% for three-five years.


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