Hormel Raises Adjusted Earnings Outlook to $1.45-$1.51
The branded food company posted $2.96 billion of third-quarter net sales as organic sales reversed from growth to a 2% decline.
Hormel Foods Corporation (HRL) raised and narrowed its fiscal 2026 adjusted diluted earnings outlook to $1.45 to $1.51 a share after a third quarter in which organic net sales reversed from growth to a 2% decline.
The company said the update reflected strong year-to-date performance and continued opportunities ahead, and that it remains confident in delivering adjusted earnings growth for the year consistent with, or above, its long-term algorithm. Adjusted operating income guidance was lifted to $1.08 billion to $1.12 billion, implying 6% to 10% growth, from $1.06 billion to $1.12 billion.
Net sales were $2.96 billion in the quarter ended July 26, 2026, down 2.4% from $3.03 billion a year earlier, after $2.97 billion in the second quarter. Organic net sales had risen 3% in the second quarter. GAAP diluted earnings were $0.11 a share, compared with $0.33 a year earlier, after $0.29 in the second quarter and $0.33 in the first. Adjusted diluted earnings were $0.37 a share, compared with $0.35 a year earlier, after $0.40 in the second quarter.
Interim chief executive officer Jeff Ettinger said the company delivered solid third-quarter results, growing adjusted earnings and continuing to advance fiscal 2026 objectives. President and chief executive officer-elect John Ghingo said net sales declined due to portfolio-shaping actions, lower commodity-based pricing in portions of the business and a consumer environment that remains under pressure.
GAAP operating income was $111 million, or a 3.7% operating margin, compared with $240 million and a 7.9% operating margin a year earlier. Adjusted operating income was $266 million, or a 9.0% adjusted operating margin, compared with $254 million and an 8.4% adjusted operating margin a year earlier. Significant discrete pre-tax items included a $56 million loss related to the Brazil divestiture, a $48 million non-cash impairment of a minority investment in Indonesia and a $38 million litigation settlement. The effective tax rate was 42.3%, compared with 22.3% a year earlier, and was significantly impacted by one-time items.
Retail, the largest segment, posted net sales of $1.78 billion, down 4.3% from a year earlier. Volume fell 9% and organic volume fell 9%. Organic net sales declined 3%. Segment profit was $118 million, down 3.7%. Declines in commodity turkey and private-label snack nuts were partially offset by value-added turkey, contract manufacturing and Planters snack nuts, with growth also in the SPAM family, Applegate and Hormel chili. Segment profit decreased on lower net sales and higher logistics expenses, partially offset by lower selling, general and administrative expenses.
Foodservice net sales were $1.00 billion, up 1.6% from a year earlier, and organic net sales rose 2%, the 12th consecutive quarter of organic net sales growth in that segment. Volume was down 1%. Segment profit was $144 million, up 2.7%. Growth was broad-based despite lower commodity-based pricing in portions of the portfolio, led by premium prepared proteins, branded pepperoni and Jennie-O turkey, with additional contributions from Austin Blues, Hormel Natural Choice and Hormel Fire Braised meats. Segment profit increased on higher net sales and favorable pork input costs, partially offset by higher logistics and selling, general and administrative expenses.
International net sales were $179 million, down 4.7% from a year earlier. Organic net sales declined 4%. Volume fell 11%. Segment profit swung to a $29 million loss from $19 million a year earlier. Branded export demand remained resilient, but recognition of certain SPAM export sales was adversely impacted by a one-time legal-entity transition, and segment profit was significantly impacted by the non-cash impairment charge. Adjusted International segment profit was $19.0 million, essentially flat versus $18.9 million a year earlier, as minority investment performance offset weaker results in Brazil.
During the quarter, the company announced a definitive agreement to sell its Brazil operations, operated under the Ceratti brand, and classified the business as held for sale. The transaction closed in the early part of the fourth quarter of fiscal 2026. The divestiture reflects efforts to simplify the company’s portfolio and focus its international strategy on markets with the strongest long-term growth opportunities, and expected impacts are reflected in updated fiscal 2026 guidance. Beginning in the fourth quarter, the divestiture will be excluded from year-over-year comparisons in non-GAAP organic volume and organic net sales.
Cash flow from operations was $241 million, up 54% from a year earlier. Capital expenditures were $68 million. The company returned $161 million to stockholders through dividends. Cash on hand, excluding assets held for sale, was $840 million at quarter end. Inventories were $1.8 billion.
For fiscal 2026, the company now expects net sales of $12.1 billion to $12.2 billion, reflecting organic net sales growth of 1% to 2%, down from a prior range of $12.2 billion to $12.5 billion and 1% to 4% organic growth. GAAP diluted earnings guidance was lowered to $1.06 to $1.12 a share from $1.28 to $1.37. Operating income guidance was updated to $0.83 billion to $0.87 billion, which includes the estimated Brazil divestiture loss, the Indonesia impairment and a litigation settlement.