Hormel Foods (HRL) Q4 profit declines 2% but beats estimates

Hormel Foods Corporation (NYSE: HRL) reported a 2% decline in earnings for the fourth quarter of 2019 due to lower sales as well as higher provision for income taxes. The bottom line exceeded analysts’ expectations while the top line missed consensus estimates.

Net earnings decreased by 2% to $255.5 million or $0.47 per share. The results reflected the divestiture of the CytoSport business. Net sales declined by 1% to $2.5 billion. The volume of 1.24 billion pounds, down 1% from last year, while organic volume rose by 1%.

Looking ahead into fiscal 2020, the company expects net sales in the range of $9.50-10.30 billion and earnings in the range of $1.69-1.83 per share. The company’s outlook assumes higher protein prices and further volatility related to the impact of African swine fever and global trade uncertainty.

The company’s expected fiscal 2020 organic pretax earnings growth rate is in line with its near-term goal of 5-7% organic pretax earnings growth. As a reminder, CytoSport earnings in 2019 contributed 10 cents to earnings per share.

In 2020, the company expects to grow operating income as it did in 2019 while also growing sales. The company also expects a higher effective tax rate in fiscal 2020 with a range of 20.5% and 22.5%. Hormel continues to make excellent progress on Burke pizza toppings plant expansion and plans to start production in the back half of fiscal 2020.

Read: JM Smucker Q2 earnings review

For the fourth quarter, sales from Refrigerated Foods rose by 4% on strong demand for foodservice items such as Hormel Bacon 1 cooked bacon, pizza toppings, and Hormel Fire Braised products. Retail sales of Hormel Black Label bacon, Applegate products, Hormel Natural Choice products, Hormel Gatherings party trays, and Columbus branded deli items also contributed to growth.

Sales from Grocery Products fell by 10% due to the divestiture of CytoSport. Sales from Jennie-O Turkey Store increased by 3% due to growth from the whole-bird and commodity businesses. Sales dropped by 12% at the International & Other segments due to weakness in branded and fresh pork exports and its multinational business in Brazil.

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