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Factors to Watch Ahead of Hormel Foods' (HRL) Q4 Earnings

Hormel Foods Corporation HRL is scheduled to release fourth-quarter fiscal 2019 results on Nov 26. The meat and food product company delivered a positive earnings surprise of 5.7% in the last reported quarter. Also, its earnings outperformed the Zacks Consensus Estimate by 5.3%, on average, over the trailing four quarters.

The Zacks Consensus Estimate for fiscal fourth-quarter earnings has been unchanged over the past 30 days at 47 cents per share. This suggests a decline of 7.8% from the year-ago period’s reported figure. The consensus mark for revenues is $2,516 million, indicating a dip of 0.4% from the figure reported in the year-ago quarter.

Hormel Foods Corporation Price and EPS Surprise



Hormel Foods Corporation Price and EPS Surprise

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

 

Key Factors to Note

Hormel Foods has been struggling with challenges in the Jennie-O Turkey segment for a while due to retail declines. Softness in retail and foodservice sales has been a deterrent. Also, the company’s Grocery Products segment’s sales and volumes have been pressurized due to CytoSport’s divestiture in early 2019. The Zacks Consensus Estimate for fiscal fourth-quarter sales at the Jennie-O Turkey and Grocery Products segments are pegged at $434 million and $612 million, respectively, whereas it reported $467 million and $659 million in the fourth quarter of fiscal 2018.

Further, the pork market has been challenged due to global trade uncertainty among other factors. On the contrary, Hormel Foods has been gaining from the robust Refrigerated Foods unit on strong brand portfolio and effective strategies. Products like Hormel Bacon 1, Hormel Fire Braised and Old Smokehouse as well as retail sales of Hormel Black Label and Columbus have been growth drivers. Apart from Columbus, buyouts of Fontanini and Ceratti have also been aiding Hormel Foods. The consensus mark for the Refrigerated Foods segment’s sales is pegged at $1,350 million for the fiscal fourth quarter, suggesting growth of 9.5% from the year-ago reported figure.

However, input cost inflation has been a threat. African swine fever in China has been weighing on the hog and pork markets. In its last earnings call, management had expected high input costs for the fiscal fourth quarter. This is likely to have put pressure on the quarterly bottom line.

What the Zacks Model Unveils

Our proven model does not predict an earnings beat for Hormel Foods this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hormel Foods has an Earnings ESP of -1.08% and a Zacks Rank #4.

Stocks With Favorable Combination

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Smucker SJM currently has an Earnings ESP of +0.75% and Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ross Stores ROST presently has an Earnings ESP of +2.39% and a Zacks Rank #2.

Lowe’s Companies LOW currently has an Earnings ESP of +1.68% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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