In a release dated June 2nd Hormel Foods (HRL) reported on the second quarter of fiscal 2022 ending May 1st 2022. For the quarter the company earned $261.7 million on revenue of $3,097 million with a diluted EPS of $0.48. Comparable values for Q2 of fiscal 2021 ending April 25th were net income of $227.9 million on revenue of $2,607 million with a diluted EPS of $0.42. Profit margin fell from 8.7 percent in Q2 FY2021 to 8.4 percent for the most recent quarter.
For Q2 FY 2022 the Jennie-O Turkey Store Segment generated sales of $407.3 million with an operating profit of $61.8 million reflecting an operating margin of 15.2 percent. For the second quarter of fiscal 2021, revenue and operating profit were $351.2 million and $12.7 million respectively yielding an operating margin of 3.6 percent. Volume in the Jennie-O segment was up 29.7 percent to 261.6 million lbs. Sales value was higher by 16.0 percent. Unit revenue declined from $1.74 per lb. in Q2 2021 to $1.56 per lb. for the most recent quarter. Segment contribution was however up 387 percent. Growth was derived from a return in food service, demand for whole birds and branded products. As in Q1 2022 increases in feed and logistic costs detracted from earnings.
In commenting on Corporate results Jim Snee, Chairman and CEO stated “We delivered strong top- and bottom-line growth during the quarter, leveraging our balanced business model, leading brands and experienced management team," He added "The second quarter marked our sixth consecutive quarter of record sales, and we achieved earnings growth for the third consecutive quarter. Operating margin increased compared to the first quarter, an indication that our efforts to mitigate inflationary pressures are working. We also made meaningful progress across our supply chain, where our investments in capacity and a recovery in staffing levels contributed to improved fill rates, inventories and production volumes”.
In relation to the turkey Segment, Snee observed "Our Jennie-O Turkey Store segment had an outstanding quarter, as its ability to adjust to current market conditions and meet strong foodservice demand drove higher results” He sounded a note of caution for the subsequent quarter stating, "After an excellent first quarter and significant profit growth in the second quarter, our Jennie-O Turkey Store team is facing an uncertain period ahead. We are actively managing the impacts from highly pathogenic avian influenza (HPAI) on turkey supply and will take the appropriate actions to protect the health of the turkeys across our supply chain. Similar to what we experienced in 2015, HPAI is expected to have a meaningful impact on industry poultry supplies over the coming months. Beginning in the third quarter, we anticipate large supply gaps in the Jennie-O Turkey Store vertically integrated supply chain, caused by flock losses to date. Our dedicated and experienced team is managing through operational challenges caused by the outbreaks and adapting to changing business conditions. The team has shown unwavering commitment and resolve in the face of a very difficult situation."
Hormel Foods posted total assets of 13,122 million on May 1st of which $6,750 comprised goodwill and intangibles. Long-term debt was $3,454 against an intraday market capitalization of $26,290 million. HRL has traded over the past 52 weeks in a range of $40.48 to $55.11 with a 50-day moving average of $51.60. HRL trades with a forward P/E of 24.8 and a beta of 0.1. For the trailing 12-month period, operating margin attained 10.0 percent and profit margin 7.7 percent. The company has generated returns on assets of 6.6 percent and on equity 13.6 percent. HRL closed at $48.08 on June 1st but fell sharply at the open following the release to $45.75On June 2nd.
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