Hormel Foods Corporation (NYSE:HRL) saw its stock drop sharply on Thursday after the company reported fiscal third-quarter earnings that fell well below analyst forecasts, overshadowing stronger-than-expected sales.
Shares of the global packaged food maker slid 7.8% in premarket trading following the announcement.
For the quarter ended July, Hormel posted adjusted earnings of $0.35 per share, missing Wall Street’s $0.41 consensus. Revenue, however, came in at $3.03 billion, topping expectations of $2.98 billion and improving 4.6% year-over-year.
The company blamed surging commodity costs for the earnings shortfall, noting that its ongoing Transform and Modernize program helped offset only part of the pressure. Operating margins narrowed to 8.4% from 9.2% in the prior year.
“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.”
Guidance for the current quarter also came in light. Hormel projected adjusted earnings between $0.38 and $0.40 per share, with revenue of $3.15–$3.25 billion. Analysts had been looking for $0.49 per share and revenue at the higher end of that range.
By segment, Retail volumes rose 5% with sales also up 5%, but profit slipped 4%. Foodservice organic sales advanced 7%, while profit eased 1%. International sales climbed 6% on an 8% increase in volume, though profit in the division 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.”
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