Hormel Foods (HRL) Q3 2024 earnings summary

Executive summary

• Delivered solid third-quarter results with earnings above expectations, driven by food service growth, international recovery, and progress on the Transform and Modernize initiative.

• Core business remains healthy despite top-line declines in retail and international segments, mainly due to lower sales of whole bird turkeys, contract manufacturing, and Planters® production disruptions.

• Narrowed full-year earnings outlook, reflecting confidence in the business despite production disruptions and lower-than-expected commodity markets.

• Cash flow from operations reached $218 million in Q3, with $155 million returned to shareholders via dividends.

• Transform and Modernize initiative continues to deliver operational improvements and cost savings.

Financial highlights

• Third quarter net sales were $2.90 billion, down 2% year-over-year; volume was 1.02 billion pounds.

• Gross margin held steady at 16.8% year-over-year.

• Diluted EPS was $0.32, up 7% year-over-year; adjusted diluted EPS was $0.37.

• Earnings before income taxes rose 9% to $226 million; adjusted EBIT was $256 million.

• Year-to-date operating cash flow increased 18% to $858 million.

Outlook and guidance

• Fiscal 2024 net sales guidance updated to $11.8–$12.1 billion, down from $12.2–$12.5 billion, reflecting commodity market conditions, Suffolk facility disruption, and contract manufacturing softness.

• Full-year diluted EPS guidance narrowed to $1.45–$1.51; adjusted EPS to $1.57–$1.63, reflecting nonrecurring costs and legal settlements.

• Effective tax rate for fiscal 2024 expected between 22.0% and 23.0%.

• Continued benefits from the Transform and Modernize initiative are assumed in guidance.

• Q4 gross profit margin expected to rise year-over-year, led by International segment.