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Hormel (HRL) Misses on Q1 Earnings, Trims FY17 Guidance

Meat and food products company, Hormel Foods Corporation HRL reported weaker-than-expected results for first-quarter fiscal 2017 (ended Jan 31, 2017).

On a quarter-to-date basis, shares of this Zacks Rank #2 (Buy) stock yielded a return of 7.15% - outperforming 4.86% gain recorded by the Zacks classified Food-Meat Products industry.

Bottom-Line Performance

Quarterly adjusted earnings came in at 44 cents per share, a penny higher than the year-ago tally. However, the bottom line missed the Zacks Consensus Estimate of 46 cents.

Quarter in Details

In fiscal first quarter, Hormel Foods generated net sales of $2,280.2 million, down 0.5% year over year. The top line also fell short of the Zacks Consensus Estimate of $2,287 million.

Hormel Foods' cost of sales edged down marginally 0.4% to $1,727.9 million. Gross margin contracted by 10 basis points (bps) to 24.2%.

Quarterly selling, general and administrative expenses came in at $210.1 million, as against $209.9 million recorded in the year-ago period.

The company's operating margin was 15.6% compared to 15.7% in the prior-year quarter.

Segmental Performance

In the reported quarter, revenues from Grocery Products improved 6.5% to $417.7 million.

Revenues at the Jennie-O Turkey Store segment jumped 13.1% to $421 million.

The company's Refrigerated Foods segment generated revenues of $1,123 million, down 3.4% year over year.

International & Other revenues declined 2.1% to $125.8 million

Specialty Foods revenues were down 19% to $192.6 million.

Balance Sheet and Cash Flow

Exiting fiscal first quarter, Hormel Foods had cash and cash equivalents of $609.8 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 first quarter, Hormel Foods generated cash of $177.6 million from operating activities, plunging 36.3% year over year. Capital expenditure on purchase of property and plant totaled $34 million compared to $32.1 million a year ago.

The company paid its 354th consecutive quarterly dividend at an annualized rate of 68 cents, effective Feb 15, 2016.

Outlook

Hormel Foods projects earnings within the range of $1.65-$1.71 per share for fiscal 2017 as against the previously stated guidance of $1.68-$1.74 per share. The forecast has been revised downwards on grounds of dismal conditions prevailing in the turkey industry. However, the company is poised to grow on the back of its balanced business model.

Other Stocks to Consider

Some other favorably placed stocks within the industry are listed below:

Blue Buffalo Pet Products, Inc. BUFF has an average earnings surprise of +10.40% for the trailing four quarters and currently carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Conagra Brands, Inc. CAG presently carries a Zacks Rank #2 and has an average earnings surprise of +13.30% for the last four quarters.

Energizer Holdings, Inc. ENR carries a Zacks Rank #2 and has an average earnings surprise of +20.50% for the past four quarters.

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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.


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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