Hormel Foods (HRL) Q4 Earnings Beat, Issues FY'18 Guidance

Meat and food products company, Hormel Foods Corporation (NYSE:HRL) , reported better-than-expected results for fourth-quarter fiscal 2017 (ended October).

Adjusted earnings came in at 41 cents per share, a penny higher than the Zacks Consensus Estimate. However, the bottom line fell short of the year-ago tally of 45 cents.

The metric for fiscal 2017 came in at $1.57 per share, lower than the year-ago tally of $1.64.

Inside the Headlines

In the fiscal fourth quarter, Hormel Foods generated net sales of $2,492.6 million, exceeding the Zacks Consensus Estimate of $2,394 million. However, the top line was lower than $2,627.9 million, the figure recorded in the year-ago comparable period.

Hormel Foods’ cost of sales was down 2.4% year over year to $1,981.1 million. Gross margin contracted 230 basis points (bps) to 20.5%.

Selling, general and administrative expenses were $194.2 million, down from $244 million, recorded in the comparable time frame last year.

The company’s operating margin was 13.2% compared with 13.9% a year ago.

Revenues for fiscal 2017 came in at $9,167.5 million compared with $9,523.2 million from the year-earlier period.

Gross margin for fiscal 2017 was 21.9%, down 80 bps year over year. While operating margin for the same time frame was 14%, up 10 bps year over year.

Hormel Foods Corporation Price, Consensus and EPS Surprise

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

Segment Details

In the reported quarter, revenues from Grocery Products marginally dipped 0.5% to $489.2 million.

Revenues at the Jennie-O Turkey Store segment dropped 10.4% to $484.9 million.

The company’s Refrigerated Foods segment generated revenues of $1,166.7 million, down 5.7% year over year.

International & Other revenues were up 10.1% to nearly $155 million.

Specialty Foods revenues were down 9.2% to $196.8 million.

Other Financial Particulars

Exiting the fiscal fourth quarter, Hormel Foods had cash and cash equivalents of $444.1 million, up from $415.1 million as of Oct 30, 2016. However, the company’s long-term debt of $250 million (excluding current maturities) remained mostly unchanged.

For fiscal 2017, Hormel Foods generated cash of $1,010.2 million from operating activities, marginally up 1.7% year over year. Capital expenditure on purchase of property and plant totaled $217.3 million compared with $249.3 million incurred in the prior-year period.

The company paid its 357th consecutive quarterly dividend at an annualized rate of 68 cents, effective on Nov 15, 2017. Notably, Hormel Foods declared a 10% hike in annual dividend, making the 52nd successive raise of the same.

Outlook

Hormel Foods intends to boost near-term profitability on the back of its latest acquisitions and product launches. This Zacks Rank #3 (Hold) stock declared that it has merged its Specialty Foods segment with the Grocery Products one for driving revenue growth and securing increased cost savings going forward. However, the company perceives that its Jennie-O Turkey Store business segment will continue to face persistent challenges in the quarters ahead.

Based on the current fundamentals, Hormel Foods anticipates generating revenues in the range of $9.40-$9.80 billion for fiscal 2018. While fiscal 2018 earnings are anticipated to lie within the band of $1.60-$1.70 per share.

Stocks to Consider

A few better-ranked stocks in the industry are listed below:

The Boston Beer Company, Inc. (NYSE:SAM) flaunts a Zacks Rank #1 (Strong Buy) and delivered an average positive earnings surprise of 63.35% for the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pilgrim's Pride Corp. (NASDAQ:PPC) sports a Zacks Rank of 1 and came up with an average positive earnings surprise of 1.53% during the same time frame.

Craft Brew Alliance, Inc. (NASDAQ:BREW) carries a Zacks Rank #2 (Buy) and pulled off an average positive earnings surprise of 250.20% over the same period.

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