Hormel Foods Q3 Earnings Beat on Margin Expansion, Sales Miss

Hormel Foods Corporation HRL reported third-quarter fiscal 2026 adjusted earnings of 37 cents per share, up 5.7% year over year and above the Zacks Consensus Estimate of 36 cents. 

Net sales fell 2.4% to $2,961.3 million and missed the consensus mark of $3,047 million. Organic net sales decreased 2% in the quarter. Total volume declined 7.4%, while organic volume fell 7.1%.

Hormel Foods Corporation Price, Consensus and EPS Surprise

Hormel Foods Corporation price-consensus-eps-surprise-chart | Hormel Foods Corporation Quote

Adjusted selling, general and administrative expenses fell 11.6% to $216.9 million from $245.2 million. Advertising investments were $34 million compared with $41 million a year earlier.

Adjusted operating income increased 4.7% year over year to $266.2 million. Adjusted operating margin expanded 60 basis points to 9% from 8.4% in the year-ago quarter.

HRL Provides Revenue & Profit Insights by Segment

Retail net sales declined 4.3% year over year to $1,779.4 million, while organic net sales fell 3.3%. Volume decreased 9.1% as commodity turkey and private-label snack nuts pressured results. Strong performance in value-added turkey offerings, contract manufacturing and Planters snack nuts partly offset the weakness. SPAM products, Applegate natural and organic meats and Hormel chili also delivered growth, while segment profit decreased 3.7% to $118.1 million as lower sales and higher logistics expenses outweighed lower SG&A costs.

Foodservice net sales rose 1.6% to $1,003.2 million, with organic net sales up 1.8%. Volume declined 1.5%, but the segment still generated its 12th straight quarter of organic net sales growth. Growth was broad-based and led by premium prepared proteins, branded pepperoni and Jennie-O turkey. Segment profit increased 2.7% to $144.5 million as higher sales and favorable pork input costs more than offset higher logistics and SG&A expenses.

International net sales declined 4.7% to $178.7 million, while organic net sales fell 4.4%. Volume dropped 10.8%, and the timing of certain SPAM export sales was hurt by a one-time legal-entity transition. Segment loss was $29.2 million against $18.9 million of profit in the year-ago quarter, largely because of a non-cash impairment charge.

Hormel Foods’ Financial Health Snapshot

Hormel Foods ended the quarter with $839.6 million in cash and cash equivalents, up from $670.7 million at the end of fiscal 2025. Inventories were $1.8 billion, while the company returned $161 million to its shareholders through dividends during the quarter.

Cash flow from operations increased 54% year over year to $240.6 million. Capital expenditures totaled $68.2 million, with spending focused on infrastructure enhancements and data and technology investments.

What to Expect From HRL in the Future?

Hormel Foods lowered fiscal 2026 net sales guidance to $12.1-$12.2 billion from $12.2-$12.5 billion and narrowed organic net sales growth expectations to 1-2% from 1-4%. The revised view reflects the external environment and the fiscal fourth-quarter impact of the Brazil divestiture. The transaction closed early in the fiscal fourth quarter, and its expected impact is reflected in the updated guidance. 

The company raised adjusted operating income guidance to $1.08-$1.12 billion from $1.06-$1.12 billion. Adjusted earnings per share guidance was raised and narrowed to $1.45-$1.51 from $1.43-$1.51, implying growth of 6-10%.

This Zacks Rank #4 (Sell) stock has tumbled 7.3% over the past month compared with the industry’s decline of 6.9%.

Image Source: Zacks Investment Research

Stocks to Consider

The Chefs' Warehouse, Inc. CHEF distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. At present, CHEF flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for Chefs' Warehouse’s current fiscal-year sales and earnings implies growth of 10.6% and 33.7%, respectively, from the year-ago reported figures. Chefs' Warehouse delivered a trailing four-quarter earnings surprise of 30.4%, on average.

The Vita Coco Company, Inc. COCO develops, manufactures, markets and distributes coconut water products under the Vita Coco brand name in the United States, Canada, Europe, the Middle East, Africa and the Asia Pacific. COCO currently sports a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 21.9%, on average.

The Zacks Consensus Estimate for Vita Coco’s current fiscal-year sales and earnings indicates growth of 31.6% and 64.7%, respectively, from the year-ago reported numbers. 

Darling Ingredients Inc. DAR develops, produces and sells sustainable natural ingredients from edible and inedible bio-nutrients in North America, Europe, China, South America and internationally. At present, Darling Ingredients holds a Zacks Rank of 2 (Buy). DAR delivered a trailing four-quarter earnings surprise of 38.9%, on average. 

The consensus estimate for Darling Ingredients’ current fiscal-year sales and earnings implies growth of 11.5% and 926.5%, respectively, from the year-ago figures.

7 Best Stocks for the Next 30 Days

Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."

Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research