Why Hormel Foods Shares Are Dipping Today?

Hormel Foods Corp HRL shares are trading lower after the company reported worse-than-expected Q3 FY23 earnings and a reduced FY23 outlook.

The company reported sales of $2.96 billion, missing the consensus of $3.05 billion.

Net sales for Retail decreased 2% Y/Y, Foodservice fell 3%, and International declined 6%.

Adjusted EPS of $0.40 came below the consensus of $0.41.

Adjusted gross margin expanded 10 basis points Y/Y to 16.8%, adjusted operating margin expanded 10bps Y/Y to 9.7%, and the operating income for the quarter fell 1.5% to $286.8 million.

Adjusted selling, general and administrative expenses decreased 0.5% Y/Y to $221.1 million.

As of July 30, 2023, cash and cash equivalent stood at $686.5 million. Operating cash flow for the quarter totaled $317 million.

"The operating environment domestically and abroad continues to be dynamic, and we anticipate consumers and operators to remain highly intentional in their spending. As we close the year, we expect a strong finish from our Foodservice segment, incremental savings from a series of projects aimed at reducing costs and complexity throughout our system, and further synergies from our implementation of GoFWD. Additionally, we expect continued softness in our International segment and earnings pressure from heightened competition at retail. Our continued investments into our brands, disciplined financial strategy and balanced approach across our businesses position us well for future growth as we close a challenging 2023," said Jim Snee, chairman of the board, president and chief executive officer.

Outlook: Hormel lowered FY23 adjusted EPS to $1.61 - $1.67 from $1.70-$1.82 versus the consensus of $1.73.

Full-year net sales are expected to be (4)% to flat (prior view net sales growth of 1%-3%), reflecting performance to date and current assumptions for raw material input costs in Q4.

The company expects Q4 FY23 revenue of $3.1 billion - $3.6 billion vs. $3.43 billion estimate and adjusted EPS to fall Y/Y on continued weakness in the International segment and lower Retail segment.

Price Action: HRL shares are trading down by 2.07% at $38.84 on the last check Thursday.