In a release dated May 30th Hormel Foods (HRL) reported on Q2 FY 2024 ending April 28th, disappointing on the top line but exceeded consensus on adjusted EPS. For the quarter the company earned a reported (GAAP) $189.2 million on revenue of $2,887 million (Zack’s consensus of $2,987 million) with a diluted EPS of $0.34. Comparable values for Q2 FY 2023 ending April 30th were net income of $217.2 million on revenue of $2,978 million with a diluted EPS of $0.40.
Compared to Q2 of FY 2023 sales declined by 3.0 percent, gross margin increased from 16.5 percent to 17.5 percent; operating margin was down from 9.9 percent to 8.7 percent. Profit margin fell from 7.3 percent to 6.5 percent for the most recent quarter.
Effective October 2022, Hormel reorganized their operating divisions into Retail, Food Service and International segments. The Jennie-O Turkey Store Division was integrated among the three operating divisions. Accordingly, releases for Fiscal 2023 and thereafter do not disclose either volume or cost data for this subsidiary as in previous years. In reviewing the release, there was only indirect comment on the turkey business noting lower volume with a reference to the risk of HPAI that has impacted turkey flocks in Minnesota in recent weeks despite implementation of biosecurity. In previous analysts’ calls CEO Jim Snee has expressed ongoing concern over losses during November and December 2023 and more recently for 2024.
Segment performance in both sales and operating profit for the most recent quarter was compared with Q2 FY 2023:-
- Retail Segment volume -5.4%: sales -6.7%: segment profit -13.6%.
- Food Service Segment volume -2.9%: sales +5.7%: segment profit +2.7%.
- International Segment volume -7.2%: sales -7.3%: segment profit +70.7%
In commenting on Hormel results Jim Snee, Chairman, president and CEO stated "We delivered a strong first half, with consecutive quarters of better-than-expected earnings, a significant improvement in operating cash flows, continued Foodservice strength, recovery in our International business and stable volumes across our business. "He added, "Importantly, we made further progress on our strategic initiatives, and we remain on track to deliver on our commitments to improve our business and drive long-term shareholder returns and growth."
For FY 2024 the company projected a one to three percent increase in net sales growth compared to FY 2023 and an upgraded full year diluted net earnings per share of $1.55 to $1.65.
Hormel Foods posted total assets of $14,135 million on April 28th 2024 of which $6,677 comprised goodwill and intangibles. Long-term debt was $3,073 against an intraday market capitalization of $16,780 million on June 6th. HRL has traded over the past 52 weeks in a range of $28.81 (an 8-year low) to $41.74 with a 50-day moving average of $34.68. HRL trades with a forward P/E of 19.1. HRL closed at $34.10 on May 29th pre-release. The share price closed down 9.7 to $30.79 on May 30th post release
The 12-month trailing operating margin is 9.0 percent with a profit margin of 6.4 percent. The Company has returned 4.8 percent on assets and 9.6 percent on equity.
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