Hormel Foods (HRL) Q4 2019 Earnings: What Can You Expect?

in EARNINGS/INVESTING IDEAS by

Hormel Foods Corporation (NYSE:HRL) is scheduled to report Q4 earnings results on Tuesday, November 26, 2019, at 9:00 AM ET.

The company is expected to report earnings of $0.47/share on revenue of $2.508 billion. The consensus earnings per share (EPS) of $0.47/share is based on a poll of 6 analysts and represents a decline of -8.8% over the same quarter last year when the company reported earnings of $0.51/share.

The revenue forecast of $2.508 billion based on a poll of 10 analysts implies a year-over-year (YoY) decline of -0.7%. Last year the company reported $2.525 billion in revenue for the quarter.

Expected to report EPS decline of -$0.04/share for Q4, 2019
Metric Expected Prior Year YoY Change
Revenue $2,507.96 $2,524.70 -0.7%
EPS $0.47 $0.51 -8.8%

At the company’s last investor day on October 10, 2019, management provided the following breakdown of products key to driving revenue for the company. Approximately, 52% of Hormel’s revenue comes from U.S. Retail brands like SPAM, Skippy, and Wholly Guacamole.

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Management also outlined the following strategic priorities:

  • Grow deli and foodservice brands
  • Accelerate growth in ethnic cuisines
  • Pursue bold new innovation
  • Expand global presence
  • Protect core brands
  • Continue to transform company (supply chain, etc.)

Going forward, management provided guidance of 2-3% organic net sales growth driven by momentum in the company’s foodservice and deli business and 5-7% organic operating profit growth resulting from product mix shift and innovation.

Earnings Call Trends

Historically, management has exceeded analyst expectations 5 out of the last 8 tracked quarters, missed 1 quarter, and met expectations 2 quarters.

What are your expectations from Hormel Foods for earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q3, 2019 $0.36 $0.37 2.8% Beat
Q2, 2019 $0.45 $0.46 3.4% Beat
Q1, 2019 $0.44 $0.44 0.0% Meet
Q4, 2018 $0.48 $0.51 5.2% Beat
Q3, 2018 $0.39 $0.39 0.0% Meet
Q2, 2018 $0.45 $0.44 -2.2% Missed
Q1, 2018 $0.43 $0.44 1.1% Beat
Q4, 2017 $0.39 $0.41 3.0% Beat

One question we always consider here at the Bankers’ Tribune is how important are earnings reports to Hormel Foods’ stock price performance? It’s more important for some companies than for others.

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending July 28, 2019, the stock price reacted by increasing by 2.5%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-22 $40.97 $42 2.5% Increase
2019-05-23 $39.49 $40.27 2.0% Increase
2019-02-21 $43.13 $42.91 -0.5% Decline
2018-11-20 $45.36 $45.43 0.2% Increase

Fundamentals And Technical Analysis

Hormel Foods is currently trading at $42.76/share, up 1.1% for the day. The company is trading at approximately 92.4% of its 52-week high of $46.26/share. The company’s stock price is up 1.8% since the last earnings report and up 0.1% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 50.31 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 22.9x and a forward P/E multiple of 24.1x. Hormel Foods’ current share price also implies a price-to-book (P/B) multiple of 3.8x. The following table summarizes some other key fundamental ratios:

Data as of November 25, 2019
Metric Value
Last Fiscal Period FY2019.Q3
Period End Date July 28, 2019
Stock Price (Current) $42.76
P/E Ratio 22.9x
P/E Ratio (Fwd) 24.1x
PEG Ratio 13.0
Total Debt to Capital (%) 1.1%
Levered Free Cash Flow $771.6 million
Enterprise Value / EBITDA 16.6x

Source: Finbox

Company Profile: Hormel Foods Corporation

Hormel Foods Corporation is a large-cap stock with a market capitalization of $22.592 billion and a total enterprise value of $22.272 billion. The company operates in the Consumer Staples sector and the Food Products industry.

Hormel Foods Corporation produces and markets various meat and food products in the United States and internationally. The company operates through five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other. It offers various perishable meat products, including fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamoles, and bacons; and shelf-stable products, such as canned luncheon meats, peanut butters, chilies, shelf-stable microwaveable meals, hashes, stews, meat spreads, flour and corn tortillas, salsas, tortilla chips, and other products.

The company also provides turkey products; nutritional food products and supplements; dessert and drink mixes; and industrial gelatin products. It sells its products through sales personnel, as well as through independent brokers and distributors.

The company was formerly known as Geo. A. Hormel & Company and changed its name to Hormel Foods Corporation in January 1995.

Hormel Foods Corporation was founded in 1891 and is headquartered in Austin, Minnesota.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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