Sign in

You're signed outSign in or to get full access.

HF

HORMEL FOODS CORP /DE/ (HRL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered net sales of $2.90B (+0.4% YoY) and diluted EPS of $0.33 (adjusted EPS $0.35), broadly in line with internal expectations; operating margin was 8.6% (adjusted 9.1%) .
  • Guidance narrowed: FY25 organic net sales growth to 2–3%, GAAP EPS to $1.49–$1.59, and adjusted EPS to $1.58–$1.68; adjusted operating income range tightened to $1.175–$1.248B, reaffirming $100–$150M T&M benefits .
  • Segment mix: Retail net sales flat with segment profit up 4%; Foodservice organic net sales +4% with segment profit down 6%; International net sales +7% with segment profit down 21%, reflecting mix and Brazil softness .
  • Management flagged Q3/Q4 acceleration: stronger turkey portfolio, Planters recovery, ad spend ramp, and continued T&M savings; tariffs and lower investment income assumed headwinds in H2 .

What Went Well and What Went Wrong

What Went Well

  • “We achieved solid organic top-line growth and delivered second quarter results in line with our expectations… we anticipate strong second half growth” — Jim Snee (CEO) .
  • Retail segment profit +4% YoY, aided by T&M efficiencies and lower SG&A; Applegate, Herdez/Wholly refrigerated guacamole, and Jennie‑O lean ground turkey remained strong .
  • Foodservice organic net sales +4% in a soft industry backdrop; pipeline of innovation (Fontanini hot honey sliced sausage; Flash 180 sous‑vide chicken) reinforces leadership with operators .

What Went Wrong

  • Gross profit down YoY and EBITDA below consensus; margin pressures in Foodservice non‑core businesses and International profit −21% on export customer mix shift and Brazil softness .
  • Advertising investments fell to $36M (vs. $44M) on timing, implying heavier H2 spend and near‑term margin drag .
  • Cash from operations dropped to $56M (from $236M) as the company intentionally built inventory for summer demand; lower investment income also pressured EPS .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$3.14 $2.99 $2.90
Diluted EPS (GAAP) ($)$0.40 $0.31 $0.33
Adjusted Diluted EPS ($)$0.42 $0.35 $0.35
Operating Margin % (GAAP)9.4% 7.6% 8.6%
Adjusted Operating Margin %9.8% 8.5% 9.1%
Cash from Operations ($USD Millions)$409 $309 $56
Q2 2025 vs EstimatesConsensusActual
Revenue ($USD Billions)$2.90*$2.90
Primary EPS ($)$0.34*$0.33 GAAP; $0.35 adjusted
EBITDA ($USD Millions)$324.4*$313.5*

Note: Values with asterisk (*) retrieved from S&P Global.

Segment (Q2 2025)Volume YoYNet Sales ($USD Millions)Net Sales YoYSegment Profit ($USD Millions)Segment Profit YoY
Retail−6.6% $1,783.8 −0.3% $137.1 +3.6%
Foodservice−7.3% $936.4 +0.5% $140.6 −5.8%
International+8.9% $178.5 +7.0% $18.4 −20.7%
KPIsQ1 2025Q2 2025
Advertising Investments ($USD Millions)$43 $36
Effective Tax Rate %21.8% 22.0%
Capital Expenditures ($USD Millions)$72 $75
Depreciation & Amortization ($USD Millions)$66 $64
Dividends Returned ($USD Millions)$155 $159
Quarterly Dividend per Share ($)$0.29 $0.29; next payable Aug 15, 2025

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)FY 2025$11.9–$12.2 $12.0–$12.2 Narrowed higher low end
GAAP Diluted EPS ($)FY 2025$1.49–$1.63 $1.49–$1.59 Narrowed lower top end
Adjusted Diluted EPS ($)FY 2025$1.58–$1.72 $1.58–$1.68 Narrowed lower top end
GAAP Operating Income ($USD Billions)FY 2025$1.118–$1.212 $1.118–$1.185 Narrowed lower top end
Adjusted Operating Income ($USD Billions)FY 2025$1.175–$1.275 $1.175–$1.248 Narrowed lower top end
T&M Benefits ($USD Millions)FY 2025$100–$150 $100–$150 (reaffirmed) Maintained
Effective Tax Rate %FY 202522.0–23.0 22.0–23.0 Maintained
Dividend per Share ($)Next Payment—$0.29 (Aug 15, 2025 payable) Maintained run-rate

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Planters brand recoveryDisruption noted; recovery to begin in Q2 “Significant, sequential market recovery” expected to continue Exceeded Q2 expectations; distribution and consumption ramp expected in H2 Improving
Turkey portfolioWhole bird market compression in FY24; lean ground strength Pricing and commodity headwinds; value-added momentum Tightening supply landscape; value-added turkey strength across retail/foodservice; upside around fresh season (Thanksgiving) Improving H2
T&M initiative savings$75M benefit FY24; expanding in FY25 On track; divestitures and DC opening planned 66 projects in Q2; DC opened; facility closure for efficiency; $100–$150M FY25 benefits reaffirmed Accelerating
Advertising cadenceFY24 $163M; FY25 increase planned Full-year ad expense to increase YoY Q2 ad spend down on timing; significant H2 increase; double-digit ad growth planned and brand focus (Planters, Applegate, SPAM, Pepperoni, Skippy) H2 ramp
International (China, exports)Recovery noted; strong SPAM/Skippy exports China geographic expansion; meat snacking innovation Double-digit export growth; robust China performance; temporary export mix pressured profit Top-line strong; mix headwind easing
Tariffs/macroGeneral caution on tariffs Macro/tariffs risk highlighted Assume $0.01–$0.02 EPS headwind in H2; consumer strained Cautious

Management Commentary

  • Jim Snee (CEO): “We achieved solid organic top-line growth and delivered second quarter results in line with our expectations… we anticipate strong second half growth led by our range of consumer-focused, protein-centric products… and ongoing benefits from our Transform and Modernize (T&M) initiative.”
  • Jacinth Smiley (CFO): “We do expect margin expansion in the second half driven primarily by turkey, Planters, our value-added business, and accelerating benefits from T&M… we’ve already seen sequential margin improvement at the back end of Q2.”
  • John Ghingo (EVP Retail): “We are planning double-digit advertising increases in the second half… significant investment in Planters… and new advertising across priority brands (Applegate, SPAM, Hormel Pepperoni, Skippy).”
  • On inventory and investment income: “We made an operational decision to build inventory for summer demand… the interest and investment income drag experienced in H1 is not anticipated to be recouped.”

Q&A Highlights

  • Back-half operating income ramp: Bridge supported by turkey portfolio strength, Planters recovery, Foodservice innovation pipeline, and T&M savings; favorable comps in Foodservice and strong International growth underpin confidence .
  • Margins expansion drivers: Turkey pricing actions, Planters margin improvement, and T&M efficiencies; commodity inputs remain elevated but pricing/pass-through strategies help offset .
  • Planters cadence and shelf recovery: Supply corrected; distribution and consumption to turn positive late Q3 and continue in H2; advertising and promotions plus flavored cashews/nut duos draw younger consumers .
  • Turkey competitive landscape: Tightening supply; Hormel focused on value-added demand-driven model; most upside in fresh season near Thanksgiving .
  • International export mix timing: Temporary customer mix headwind resolved; steady strong growth expected with China driving performance .

Estimates Context

  • Q2 2025 actuals vs consensus: Revenue $2.90B vs $2.90B*, EPS $0.33 GAAP / $0.35 adjusted vs $0.34*, EBITDA $313.5M* vs $324.4M*; slight adjusted EPS beat, revenue in line, EBITDA miss. Values retrieved from S&P Global.
  • FY25 guidance narrowing suggests Street models may modestly trim top-end EPS/operating income ranges; H2 drivers (ad spend, turkey, Planters) and T&M delivery are critical for estimate trajectories .

Key Takeaways for Investors

  • Q2 met internal expectations with a modest adjusted EPS beat vs consensus and stable top-line; near-term margin cadence hinges on H2 ad ramp and turkey/Planters execution .
  • Guidance narrowed but maintained core thesis: H2 acceleration via value‑added turkey, Planters, Foodservice innovation, International top-line, and $100–$150M T&M savings .
  • Watch Foodservice margins: organic sales growth resilient, but non‑core margin pressure persisted; management expects segment profit growth in H2 aided by innovation and comps .
  • International mix headwinds appear temporary; China momentum continues, but export customer mix can swing profitability quarter to quarter .
  • Cash flow timing reflects inventory build; expect normalization with seasonal demand; capex focus on value-added capacity and data/technology should support productivity .
  • Tariffs and lower investment income are modeled as H2 drags; monitor policy developments and investment income line for potential variance .
  • Dividend durability intact (388th payment scheduled); income investors can rely on continued distributions while awaiting margin recovery .