February 27, 2025 Strength in value-added portfolio helped mitigate known headwinds Q1 2024 Total Turkey Portfolio Snack Nuts All Other Operating Gains Interest and Investment Income and Expense Tax Q1 2025 Q1 '24 Q1 '25 $0.35 $0.41 1 Non-GAAP measure. See Appendix: Non-GAAP Measures for more information 1 Forward-Looking Statements This presentation contains "forward-looking" information within the meaning of the federal securities laws. The "forward-looking" information may include statements concerning t ...

Hormel Foods Corporation (NYSE:HRL) Q1 2025 Earnings Conference Call February 27, 2025 9:30 AM ET Company Participants Jess Blomberg - Director of Investor Relations Jim Snee - President and Chief Executive Officer Jacinth Smiley - Executive Vice President and Chief Financial Officer John Ghingo - Executive Vice President, Retail Segment Conference Call Participants Peter Galbo - Bank of America Ken Goldman - JPMorgan Heather Jones - Heather Jones Research Rupesh Parikh - Oppenheimer Ben Thurber - Barclays ...

Financial Performance - The Company reported diluted earnings per share of $0.31 for Q1 fiscal 2025, down 23% from the previous year, with adjusted diluted earnings per share at $0.35, a decrease of 14.6%[96]. - Net sales for Q1 fiscal 2025 were $2,988,813, a slight decline of 0.3% compared to $2,996,911 in Q1 fiscal 2024, while organic net sales increased by 0.6%[98]. - Total segment profit decreased by 12.8% to $278,818 in Q1 fiscal 2025, with declines in both Retail and Foodservice segments offsetting growth in the International segment[112]. - Retail segment profit fell by 20.3% to $119,147, impacted by lower sales and higher raw material costs, despite growth from key brands like SPAM and Applegate[113]. - Foodservice segment net sales increased by 1.9% to $930,185, driven by strong performance in premium prepared proteins, although segment profit decreased by 7.6%[115]. - In the first quarter of fiscal 2025, net sales decreased by 2.4% to $168,495,000 compared to $172,552,000 in the same quarter of fiscal 2024[118]. - Volume decreased by 6.9% to 74,569,000 lbs from 80,135,000 lbs year-over-year[118]. - Segment profit increased by 4.1% to $20,845,000, driven by improved export margins and growth in China[118]. - Total net sales for the quarter were $2,988,813,000, a slight decrease of 0.6% compared to $2,996,911,000 in the previous year[133]. - Adjusted diluted earnings per share decreased to $0.35 from $0.41 year-over-year[131]. Cash Flow and Expenses - Year-to-date cash flow from operations was $309 million, a decrease of 23% compared to the prior year[101]. - Cash provided by operating activities was $309,206,000, compared to $403,980,000 in the same quarter of fiscal 2024[135]. - Cash flows from operating activities were significantly impacted by changes in operating assets and liabilities, with accounts receivable decreasing by $57 million in Q1 fiscal 2025 compared to a decrease of $68 million in Q1 fiscal 2024[139]. - SG&A expenses increased by 9.4% to $263,013, primarily due to employee-related expenses and costs associated with the Transform and Modernize initiative[105]. - Net unallocated expense rose significantly to $60,700,000 from $34,020,000, primarily due to losses on the sale of a non-core operation and higher employee-related expenses[121]. - Cash and cash equivalents at the end of the period were $840,398,000, down from $963,212,000 in the prior year[135]. - The Company maintains $234 million of cash and cash equivalents held by international subsidiaries as of January 26, 2025[146]. Dividends and Shareholder Returns - The company paid $155,000,000 in cash dividends during the first quarter of fiscal 2025, an increase from $150,000,000 in the prior year[137]. - The Board of Directors approved an increased annual dividend rate for fiscal 2025, raising it to $1.16 per share from $1.13 per share, marking the 59th consecutive annual dividend increase[141]. - The Company is authorized to repurchase 3,677,494 shares of common stock but did not repurchase any shares during the first three months of fiscal 2025[147]. Future Outlook - The Company anticipates net sales growth from each segment in Q2 fiscal 2025 compared to the prior year[101]. - The company expects International segment profit to decrease in the second quarter of fiscal 2025, with growth in China and Indonesia offset by softness in Brazil[120]. - Capital expenditures for fiscal 2025 are estimated to be between $275 million and $300 million, focusing on value-added capacity, infrastructure, and new technology[142]. - Advertising investments in Q1 were $43 million, a decrease of 2% compared to the previous year, with expectations for an increase in full-year advertising expenses[106]. Debt and Financing - The Company’s outstanding debt as of January 26, 2025, included $2.9 billion of fixed-rate unsecured senior notes, with $25 million in interest payments made during Q1 fiscal 2025 and an additional $49 million expected for the fiscal year[143]. - The Company has a $750 million unsecured revolving credit facility, with the potential to increase by an additional $375 million, which is available for general corporate purposes[144]. Inventory and Sales - The Company reported a decrease in inventory of $56 million in Q1 fiscal 2025, compared to a decrease of $104 million in the same period of the prior year, primarily due to holiday sales and constrained turkey inventories[139]. - Proceeds from the sale of business amounted to $13.6 million in Q1 fiscal 2025 from the sale of equity interest in Mountain Prairie, LLC[139]. - The fair value of the Company's cash flow commodity contracts was $15.5 million as of January 26, 2025, compared to $(5.9) million as of October 27, 2024[161].

Core Insights - Hormel Foods Corporation reported a decline in both net sales and earnings for the first quarter of fiscal 2025, with adjusted earnings of 35 cents per share, down from 41 cents year-over-year, missing the Zacks Consensus Estimate of 37 cents [1][2][3] Financial Performance - Net sales totaled $2,988.8 million, a decrease of 0.3% from $2,996.9 million in the prior year, but exceeded the consensus estimate of $2,939.5 million [2] - Gross profit was $475.2 million, down from $508.7 million year-over-year [3] - Selling, general and administrative expenses rose to $263 million from $240.4 million in the previous year [3] - Adjusted operating income fell to $254 million from $294.8 million year-over-year, with an adjusted operating margin of 8.5%, down from 9.8% [3] Segment Performance - Retail unit net sales decreased by 1.1% to $1,890.1 million, with volumes down 3.7%, impacted by production disruptions [4] - Foodservice segment net sales increased by 1.9% to $930.2 million, despite a 4.7% decline in volumes, driven by premium products [6] - International unit net sales fell by 2.4% to $168.5 million, with volumes down 6.9%, although growth in China partially offset declines in Brazil [7] Strategic Initiatives - Hormel Foods is advancing its Transform and Modernize (T&M) initiative, expecting $100 million to $150 million in additional benefits in fiscal 2025 [10] - The company divested its last sow farm to reduce commodity exposure and streamline its portfolio [10] Future Outlook - For fiscal 2025, Hormel Foods expects net sales between $11.9 billion and $12.2 billion, with organic growth projected at 1% to 3% [11] - Operating income is anticipated to range from $1,118 million to $1,212 million, with adjusted operating income expected between $1,175 million and $1,275 million [12] - Annual EPS is projected to be between $1.49 and $1.63, with adjusted EPS expected in the range of $1.58 to $1.72 [13]

Core Insights - Hormel Foods reported revenue of $2.99 billion for the quarter ended January 2025, reflecting a year-over-year decline of 0.3% and an EPS of $0.35 compared to $0.41 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $2.94 billion by 1.68%, while the EPS fell short of the consensus estimate of $0.37 by 5.41% [1] Revenue Breakdown - Retail Net Sales were $1.89 billion, surpassing the average estimate of $1.84 billion, but showing a year-over-year decline of 1.1% [4] - International Net Sales reached $168.50 million, below the average estimate of $179.03 million, representing a year-over-year decrease of 2.4% [4] - Foodservice Net Sales amounted to $930.19 million, exceeding the average estimate of $907.63 million, with a year-over-year increase of 1.9% [4] Segment Profit Analysis - Foodservice Segment Profit was $138.83 million, lower than the estimated $147.19 million [4] - International Segment Profit was $20.85 million, slightly above the estimated $20.79 million [4] - Retail Segment Profit stood at $119.15 million, below the estimated $125.46 million [4] Stock Performance - Hormel's shares have returned -4.8% over the past month, compared to a -2.2% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Viewpoint - Hormel Foods reported quarterly earnings of $0.35 per share, missing the consensus estimate of $0.37 per share, and down from $0.41 per share a year ago [1][2] Financial Performance - The company posted revenues of $2.99 billion for the quarter ended January 2025, surpassing the Zacks Consensus Estimate by 1.68%, but down from $3 billion year-over-year [3] - Hormel has surpassed consensus EPS estimates two times over the last four quarters, while it has topped consensus revenue estimates just once [2][3] Stock Performance - Hormel shares have declined approximately 8.4% since the beginning of the year, contrasting with the S&P 500's gain of 1.3% [4] - The current Zacks Rank for Hormel is 3 (Hold), indicating expected performance in line with the market in the near future [7] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.38 on revenues of $2.9 billion, and for the current fiscal year, it is $1.65 on revenues of $12.02 billion [8] - The trend of estimate revisions for Hormel is mixed, which could change following the recent earnings report [7] Industry Context - The Food - Meat Products industry, to which Hormel belongs, is currently in the top 8% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [9]

Core Viewpoint - Hormel Foods Corporation reported solid top-line performance for the first quarter of fiscal 2025, reaffirming its expectations for net sales and adjusted diluted earnings per share for the fiscal year [1][3][4]. Financial Performance - Net sales for the first quarter were $2.99 billion, with organic net sales up 1% compared to the previous year [5][6]. - Operating income was $228 million, with an adjusted operating income of $254 million, resulting in an operating margin of 7.6% and an adjusted operating margin of 8.5% [5][6]. - Diluted earnings per share were $0.31, while adjusted diluted earnings per share were $0.35 [5][6]. - The effective tax rate for the quarter was 21.8%, down from 23.4% in the previous year [19]. Fiscal 2025 Outlook - The company expects net sales for fiscal 2025 to be between $11.9 billion and $12.2 billion [4][6]. - Diluted earnings per share expectations have been updated to a range of $1.49 to $1.63, while adjusted diluted earnings per share remain between $1.58 and $1.72 [6][41]. - The company anticipates year-over-year benefits from the Transform and Modernize initiative in the range of $100 million to $150 million [6]. Segment Highlights Retail - The Retail segment saw a decline in net sales of 1% to $1.89 billion, with a volume decrease of 4% [10][29]. - Key brands such as SPAM®, Applegate®, and Jennie-O® contributed to growth, although snack nuts sales were impacted by production disruptions [10][11]. Foodservice - The Foodservice segment achieved net sales of $930 million, up 1.9%, with strong performance in premium prepared proteins and breakfast sausage categories [13][29]. - Segment profit decreased due to margin pressures, primarily in non-core businesses [13]. International - The International segment experienced strong growth in China, with net sales of $168 million, although this was offset by softness in Brazil [14][29]. - The company focused on expanding its geographical distribution and enhancing its product offerings in the China market [14]. Strategic Initiatives - Hormel Foods is executing its Transform and Modernize initiative, which includes opening a new distribution center in Memphis to enhance inventory flow [11][31]. - The company divested its last owned sow farm operation to reduce commodity exposure and simplify its portfolio [11][32]. Advertising and Community Engagement - Advertising investments for the quarter were $43 million, with expectations for an increase in full-year advertising expenses compared to the prior year [19]. - The company supported community hunger relief initiatives by donating over 30,000 turkeys during the holiday season [11].

Financial Performance - Hormel Foods reported net sales of $2.99 billion for Q1 fiscal 2025, with organic net sales up 1% compared to the previous year[4]. - The company reaffirmed its fiscal 2025 net sales outlook of $11.9 billion to $12.2 billion and adjusted diluted earnings per share expectations of $1.58 to $1.72[5]. - Diluted earnings per share for Q1 were $0.31, with adjusted diluted earnings per share at $0.35, reflecting a decrease from the previous year[4]. - Net sales for the quarter ended January 26, 2025, were $2,988,813, a decrease of 0.3% compared to $2,996,911 for the same quarter in 2024[24]. - Gross profit for the quarter was $475,232, down from $508,733 in the prior year, reflecting a decrease of 6.6%[24]. - Net earnings attributable to Hormel Foods Corporation for the quarter were $170,575, a decline of 22.1% from $218,863 in the same quarter last year[24]. - Adjusted net earnings attributable to Hormel Foods Corporation (Non-GAAP) for the quarter were $190,687, down from $226,763, reflecting a decline of 16.0%[36]. - The diluted earnings per share (GAAP) decreased to $0.31 from $0.40, representing a decline of 22.5% year-over-year[38]. - The company's fiscal 2025 outlook for adjusted operating income is projected to be between $1,175 million and $1,275 million[43]. - Hormel Foods expects diluted earnings per share (Non-GAAP) for fiscal 2025 to range from $1.58 to $1.72[43]. Segment Performance - The company experienced a 4% decline in volume and a 1% decrease in net sales within the Retail segment, with segment profit down 20%[9]. - In the Foodservice segment, organic volume and net sales growth were driven by strong performance in premium prepared proteins, turkey, and breakfast sausage categories[11]. - International segment growth was supported by strong sales in China, with significant contributions from SPAM and Skippy products, despite softness in Brazil[12]. - Segment profit for retail decreased by 20.3% to $119,147, while foodservice profit decreased by 7.6% to $138,826[27]. - The company reported a 1.6% increase in organic net sales for the foodservice segment, despite a 3.7% decline in retail[40]. Tax and Expenses - The effective tax rate for the quarter was 21.8%, down from 23.4% in the prior year, with expectations for the full year between 22.0% and 23.0%[16]. - The effective tax rate for the quarter was 21.8%, compared to 23.4% in the prior year[24]. - Advertising investments for the quarter were $43 million, with expectations for an increase in full-year advertising expenses compared to the prior year[16]. - Hormel Foods' SG&A as a percent of net sales (GAAP) increased to 8.8% from 8.0% year-over-year[38]. Cash Flow and Investments - Cash and cash equivalents increased to $840,398 from $741,881 at the end of the previous quarter[25]. - The company reported a net cash provided by operating activities of $309,206, down from $403,980 in the prior year[26]. - Hormel Foods plans to invest $275 million to $300 million in capital expenditures for fiscal 2025, with $72 million spent in Q1[16]. Strategic Initiatives - Hormel Foods Corporation is undergoing a multi-year Transform and Modernize initiative, which includes non-recurring costs that are excluded from adjusted performance measures[29]. - The company expects year-over-year benefits from its Transform and Modernize initiative in the range of $100 million to $150 million[5]. - The Transform and Modernize initiative is expected to incur estimated charges of $46 million to $52 million in fiscal 2025[43].

Core Viewpoint - Hormel Foods Corporation (HRL) is expected to report a decline in both revenue and earnings for the first quarter of fiscal 2025, with earnings estimated at 38 cents per share, reflecting a 7.3% decrease year-over-year, and revenues projected at $2.9 billion, indicating a nearly 2% decline from the previous year [1][3]. Financial Performance Expectations - The Zacks Consensus Estimate for quarterly earnings has decreased by a penny in the last 30 days, while the revenue estimate remains at $2.9 billion [1]. - Hormel Foods has a trailing four-quarter earnings surprise average of 7.4% [1]. Cost and Operational Challenges - The company has been facing rising selling, general and administrative (SG&A) expenses, attributed to increased employee-related costs and expenses related to its Transform and Modernize (T&M) initiative [3]. - Management anticipates further increases in SG&A expenses and advertising spending for fiscal 2025, which may negatively impact profitability [3]. - A production disruption at the Planters facility in Suffolk, VA, has affected the company's ability to meet demand for its snack nuts portfolio, leading to expected near-term commercial impacts and increased costs [4]. Earnings Impact - Hormel Foods expects a negative earnings per share (EPS) impact of 4-5 cents in the upcoming quarter, primarily due to lower year-over-year whole bird prices and the production disruption in Suffolk [4]. Strategic Initiatives - Despite the challenges, Hormel Foods remains committed to innovation, which has strengthened its market position [5]. - The T&M initiative aims to enhance production efficiency and supply-chain management, while growing demand for Foodservice products has provided some relief [5]. Earnings Prediction - The company's earnings model suggests a potential earnings beat, supported by a positive Earnings ESP and a Zacks Rank of 3 (Hold) [6].

Core Insights - Hormel Foods (HRL) is expected to report quarterly earnings of $0.38 per share, reflecting a year-over-year decline of 7.3% [1] - Projected revenues are anticipated to be $2.94 billion, down 2% from the same quarter last year [1] - The consensus EPS estimate has been revised downward by 3.4% in the past 30 days, indicating a reassessment by analysts [1][2] Revenue Estimates - The consensus estimate for 'Net Sales- Retail' is $1.83 billion, indicating a decrease of 4.3% from the prior-year quarter [4] - 'Net Sales- International' is expected to reach $180.75 million, reflecting an increase of 4.8% year-over-year [4] - 'Net Sales- Foodservice' is projected at $912.20 million, suggesting a slight decline of 0.1% year-over-year [4] Segment Profit Estimates - 'Segment Profit- Foodservice' is forecasted to be $149.89 million, slightly down from $150.16 million reported in the same quarter last year [5] - 'Segment Profit- International' is expected to be $20.70 million, compared to $20.03 million in the previous year [5] - 'Segment Profit- Retail' is projected at $130.78 million, down from $149.51 million year-over-year [6] Stock Performance - Hormel shares have shown a return of -4% over the past month, contrasting with the Zacks S&P 500 composite's -0.5% change [6] - The company holds a Zacks Rank 3 (Hold), suggesting it is expected to perform in line with the overall market in the near future [6]