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AUSTIN, Minn. - On Thursday, Hormel Foods Corporation (NYSE:HRL) reported third-quarter earnings that significantly missed analyst expectations, despite posting stronger-than-expected revenue.
The global food company’s shares fell 7.82% in pre-market trading after the announcement.
The maker of SPAM and Jennie-O turkey products reported adjusted earnings per share of $0.35 for its fiscal third quarter, falling well short of the $0.41 analysts had expected. This earnings disappointment came even as revenue rose to $3.03 billion, exceeding the consensus estimate of $2.98 billion and representing a 4.6% increase from the same period last year.
Hormel attributed the earnings shortfall primarily to steep rises in commodity input costs, which the company said were only partially offset by its Transform and Modernize initiative. The company’s adjusted operating margin contracted to 8.4% from 9.2% in the year-ago period.
"The third quarter demonstrated the relevance of our portfolio, evidenced by our strong organic volume and net sales performance across each of our segments," said Jeff Ettinger, interim chief executive officer. "Our earnings results, however, were disappointing, and we fell short of our expectations."
Looking ahead, Hormel provided fourth-quarter guidance that also fell short of Wall Street expectations, projecting adjusted earnings of $0.38-$0.40 per share on revenue of $3.15-$3.25 billion. Analysts had been expecting earnings of $0.49 per share and revenue at the top end of the company’s range.
The company’s Retail segment saw volume increase 5% and sales rise 5%, though segment profit declined 4%. Foodservice organic sales grew 7%, but segment profit decreased 1%. International volume jumped 8% with sales up 6%, yet segment profit fell 13%.
"We expect continued net sales growth supported by our leading positions in the marketplace. To address commodity inflation, we are taking targeted pricing actions," Ettinger added. "We expect profit recovery to lag into next year, with the near-term pressures we experienced in the third quarter persisting through the fourth quarter."