In a release dated September 4th Hormel Foods (HRL) reported on Q3 FY 2024 ending July 28th, disappointing on the top line and lowering guidance substantially for FY 2024. For the quarter the company earned a reported (GAAP) $176.7 million on revenue of $2,898 million with a diluted EPS of $0.32. Comparable values for Q3 FY 2023 ending July 30th were net income of $162.6 million on revenue of $2,963 million with a diluted EPS of $0.30.
Compared to Q3 of FY 2023 sales declined by 2.2 percent, gross margin was unchanged at 16.8 percent; operating margin was up from 7.3 percent to 8.2 percent. Profit margin increased from 5.5 percent to 6.1 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 higher volume for lean ground turkey meat at retail and Jennie-O products in food service. There was no reference to the risk of HPAI that impacted turkey flocks in Minnesota but consistent with the negligible incidence over the 3rd quarter. 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 Q3 FY 2023:-
- Retail Segment volume -9.0%: sales -7.0%: segment profit -15.0% at $127.9 million.
- Food Service Segment volume +2.0%: sales +7.0%: segment profit -3.0% at $142.5 million.
- International Segment volume -13.0%: sales -2.0%: segment profit +78.0% at 21.7 million.
For FY 2024 the company projected net sales of $11,800 to $12,100 million and a downgraded full year diluted net earnings per share in the range of of $1.45 (was $1.55) to $1.51 (was $1.65).
Hormel Foods posted total assets of $13,114 million on July 28th 2024 of which $6,668 million comprised goodwill and intangibles. Long-term debt was $3,069 million against an intraday market capitalization of $17,420 million on September 23rd. HRL has traded over the past 52 weeks in a range of $28.51 (an 8-year low) to $39.25 with a 50-day moving average of $32.01. HRL trades with a forward P/E of 18.7. HRL closed at $33.14 on September 3rd pre-release. The share price closed down 6.3 to $31.02 on September 4th post release
The 12-month trailing operating margin is 8.9 percent with a profit margin of 6.5 percent. The Company has returned 5.2 percent on assets and 10.0 percent on equity.
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