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HF

HORMEL FOODS CORP /DE/ (HRL)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered strong top-line but disappointing bottom-line results: net sales $3.03B (+4.6% YoY), diluted EPS $0.33 and adjusted EPS $0.35; profit shortfall driven by a steep, unforeseen rise in commodity input costs despite T&M savings .
  • Versus Wall Street: Revenue beat consensus ($3.03B vs $2.98B), while EPS materially missed; EBITDA also missed. Management guided Q4 adjusted EPS to $0.38–$0.40 with profit recovery lagging into FY2026; targeted pricing actions underway to offset inflation .
  • FY2025 guidance was reduced: GAAP EPS to $1.33–$1.35 (from $1.49–$1.59) and adjusted EPS to $1.43–$1.45 (from $1.58–$1.68); operating income cut alongside a narrowing tax-rate target to ~22% .
  • Stock reaction catalysts: near-term margin compression from elevated pork/beef/nut markets (~400 bps raw material inflation in Q3) and lagging price pass-through, offset by T&M benefits near the high end, Turkey strength, Planters top-line recovery, and targeted pricing planned for Q4/FY2026 .

What Went Well and What Went Wrong

What Went Well

  • Broad-based organic momentum: organic net sales +6% and organic volume +4%; all segments contributed, including robust China growth and strong SPAM exports .
  • Brand/portfolio wins: Jennie-O lean ground turkey advanced share with elasticities managed post-pricing; Planters achieved year-over-year dollar sales growth by quarter-end; Hormel premium pepperoni volume +20% in Foodservice .
  • T&M execution: ~90 projects in Q3; management reaffirmed $100–$150M FY2025 incremental T&M benefits with performance near the high end; facility optimization to improve efficiency .

What Went Wrong

  • Margin pressure: commodity inflation outweighed top-line gains; GAAP operating margin fell to 7.9% (adj. 8.4%), down from prior year’s adj. 9.2% .
  • Foodservice traffic/mix: industry traffic remained soft; margin compression in non-core businesses; convenience stores’ softness weighed on mix .
  • Planters profitability lag: despite sequential top-line recovery and distribution gains, profit improvement trailed sales due to mix and inflation impacts .

Financial Results

Headline P&L vs prior periods

MetricQ3 2024Q2 2025Q3 2025
Net Sales ($USD Millions)$2,898.4 $2,898.8 $3,032.9
Gross Profit ($USD Millions)$488.4 $484.4 $487.3
SG&A ($USD Millions)$259.7 $251.4 $258.7
Operating Income ($USD Millions, GAAP)$236.7 $248.4 $239.7
Operating Margin % (GAAP)8.2% 8.6% 7.9%
Operating Income ($USD Millions, Adjusted)$267.2 $264.9 $254.2
Operating Margin % (Adjusted)9.2% 9.1% 8.4%
Diluted EPS (GAAP, $)$0.32 $0.33 $0.33
Adj. Diluted EPS (Non-GAAP, $)$0.37 $0.35 $0.35
Effective Tax Rate (%)21.7% 22.0% 22.3%

Segment performance (Q3 FY2025 vs YoY)

SegmentNet Sales ($USD Millions)YoY %Segment Profit ($USD Millions)YoY %Volume (mm lbs)YoY %
Retail$1,858.4 +5.2% $122.6 -4.2% 712.9 +4.8%
Foodservice$987.0 +3.5% $140.7 -1.2% 248.5 -4.4%
International$187.5 +5.8% $18.9 -13.1% 85.1 +8.4%
Total$3,032.9 +4.6% $282.2 -3.4% 1,046.6 +2.7%

KPIs

KPIQ3 2024Q3 2025
Cash Flow from Operations ($USD Millions)$218.0 $156.7
Capital Expenditures ($USD Millions)$65 $72
Advertising Investments ($USD Millions)$40 $41
Dividends Returned ($USD Millions)$154.9 $159.0

Q3 2025 Actual vs S&P Global Consensus

MetricActualConsensusResult
Revenue ($USD Billions)$3.033 $2.984*Beat
Primary EPS (S&P definition, $)$0.35*$0.410*Miss
EBITDA ($USD Millions)$307.8*$367.0*Miss

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)Q4 2025NA$3.15–$3.25 New
Organic Net Sales Growth (%)Q4 2025NA1%–4% New
Diluted EPS (GAAP, $)Q4 2025NA$0.36–$0.38 New
Adj. Diluted EPS (Non-GAAP, $)Q4 2025NA$0.38–$0.40 New
Diluted EPS (GAAP, $)FY 2025$1.49–$1.59 $1.33–$1.35 Lowered
Adj. Diluted EPS (Non-GAAP, $)FY 2025$1.58–$1.68 $1.43–$1.45 Lowered
Operating Income (GAAP, $USD Millions)FY 2025$1,118–$1,185 $982–$996 Lowered
Adj. Operating Income ($USD Millions)FY 2025$1,175–$1,248 $1,054–$1,070 Lowered
Effective Tax Rate (%)FY 202522.0%–23.0% ~22.0% Lowered/Narrowed
Advertising SpendQ4 20252H expected to be up vs PY Q4 expected to decline vs PY Lowered
Capex ($USD Millions)FY 2025$275–$300 ~ $300 Narrowed to high-end
Tariff EPS Headwind ($/share)FY 2025$0.01–$0.02 (communicated intra-year) $0.01–$0.02 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 FY2025)Current Period (Q3 FY2025)Trend
Commodity inflation and pricingAnticipated upward input cost pressure across pork/beef/nuts; pricing taken in value-added turkey; pass-through dynamics noted Unanticipated sharp surge: pork bellies +~30%, cutout +~10%, trim +~20%; ~400 bps raw material inflation; targeted pricing actions, with lag Worsening inflation; mitigating via pricing and T&M
Foodservice trafficIndustry softness; organic net sales growth outpacing industry, but margin pressure in non-core Traffic remained soft; margin compression persists; direct selling team strength; recovery dependent on industry traffic Soft demand persists
Planters brandSequential improvement; momentum in distribution and retail sales Year-over-year dollar sales growth by quarter-end; profitability lagging due to mix/inflation Top-line recovery; profit lag
Turkey portfolio (Jennie-O)Strong retail demand; pricing to offset supply chain cost escalation Pricing implemented successfully; demand strong; share gains; value-added turkey a growth driver Strengthening
Transform & Modernize (T&M)Ongoing execution; distribution center opened; network optimization steps ~90 Q3 projects; benefits near high end of $100–$150M FY25 range; manufacturing footprint actions Execution sustained; benefits rising
International/ChinaChina growth and exports driving top line; Brazil softness China rebounding in retail/foodservice; meat snacking innovation; SPAM exports strong; Brazil competitive pressures China improving; Brazil challenged
Tariffs/macroTariff headwind discussed broadly Tariff EPS impact unchanged at $0.01–$0.02 Stable headwind

Management Commentary

  • “Our earnings results, however, were disappointing… The steep rise in commodity input costs… was the largest contributor to our shortfall. This inflation was partially mitigated by our Transform and Modernize (T&M) initiative.” — Jeff Ettinger, Interim CEO .
  • “We expect continued net sales growth… To address commodity inflation, we are taking targeted pricing actions. We expect profit recovery to lag into next year…” — Jeff Ettinger .
  • “Our retail team is building strong brands… SPAM showed strong quarter with YoY volume and net sales growth… Hormel Pepperoni renovation supported by ‘Boldly Irresistible’ campaign.” — John Ghingo, President .
  • “Collectively, we experienced approximately 400 basis points of raw material cost inflation in the third quarter alone.” — Jacinth Smiley, CFO .
  • “We are reaffirming our expected range of $100–$150M of incremental [T&M] benefits… and believe we will finish the year near the high end.” — Jacinth Smiley .

Q&A Highlights

  • Drivers of guidance revision: commodity markets’ sharp run-up was sudden and major, foodservice traffic recovery did not materialize, and Planters’ profit recovery lagged top-line; T&M remains on track toward the high end .
  • Pricing elasticity and pass-through: Retail pricing actions are measured against consumer strain and brand health; Foodservice pricing largely pass-through with timing lags; recent pricing will partially benefit Q4 and carry into FY2026 .
  • Inventory strategy: Intentional builds to meet back-to-school (Skippy) and center-store fill rates; not an inventory problem; elevated inventories partly reflect input cost inflation .
  • Longer-term algorithm: Management re-emphasized 2–3% net sales growth and 5–7% operating income growth as long-term goals; FY2026 guidance to be provided on Q4 call .
  • Turkey dynamics: Whole birds slightly better than expected; most upside in next year’s fresh season; ground turkey demand strong; share gains .

Estimates Context

  • Revenue beat: $3.03B actual vs $2.98B consensus*; strong organic growth across segments and SPAM exports/China contributed .
  • EPS miss: Primary EPS actual $0.35* vs $0.410* consensus; GAAP diluted EPS was $0.33 and adjusted EPS $0.35, with margin pressure from ~400 bps input inflation and lagged pricing pass-through .
  • EBITDA miss: $307.8M actual* vs $367.0M consensus*; commodity inflation and mix in non-core businesses weighed .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term margin headwinds likely persist into Q4/FY2026; watch for pricing implementation cadence and commodity normalization to gauge earnings recovery trajectory .
  • T&M benefits provide a tangible offset; management reaffirmed the $100–$150M FY2025 range with performance near the high end—focus on incremental savings momentum and footprint optimization updates .
  • Turkey momentum is durable, with successful pricing and share gains; a supportive pillar for Q4 and FY2026 top-line .
  • Planters’ top-line recovery is in place; monitor margin mix and further pricing/actions to close profitability gap .
  • Foodservice volume growth continues to outpace the industry, but traffic softness and non-core margin compression remain risks; recovery could catalyze segment profitability .
  • FY2025 guidance reset lowers expectations; Q4 adjusted EPS $0.38–$0.40 sets a cautious bar—traders should watch pricing announcements and commodity curves for upside/downside skew .
  • Tariff headwind is stable ($0.01–$0.02 EPS), tax-rate narrowed to ~22%, and capex targeted around $300M—capital allocation discipline continues alongside dividend consistency .