Hormel Foods still expects base earnings to hit the top end of its full-year guidance range despite headwinds from elevated fuel, logistics and commodity costs.
The sales revenue outlook was left at $12.2bn to $12.5bn for fiscal 2026 at the second-quarter results stage last week, a period when organic growth reached 3%.
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Hormel’s forecast for that metric remains at 1-4% even though the protein-centric business faces the full impact of elevated fuel costs in the third quarter – 13 weeks versus six weeks in quarter two.
“The significant new headwind that popped up midway through the quarter was rising fuel costs,” John Ghingo, the president of the New York-listed business told analysts.
“While consumers are under pressure and sentiment is low, food has remained resilient in recent months, particularly with growth in protein, where our portfolio is well positioned.”
The Jennie-O turkey and Black Label bacon brand owner also reaffirmed the guide for adjusted diluted earnings per share at $1.43-$1.51, or growth of 4% to 10%.
However, in reported terms, the forecast for diluted EPS was cut to $1.28-$1.37 to reflect the disposal of the whole-bird turkey business – announced in February – which Hormel expects will lower full-year sales by about $50m.
Hormel had guided to a range of $1.37-1.46 in February, and $1.43-1.51 in December when the fiscal 2025 results were unveiled.
Interim CEO Jeffrey Ettinger said: “Based on how the year is progressing and the underlying momentum of the business, we believe we are trending towards the upper half of our earnings range.
“However, we think that maintaining our current outlook is the right approach at this stage of the year and appropriately reflects near-term dynamics.”
Pork and beef costs remained elevated in the second quarter, Paul Kuehneman, also acting in an interim capacity as CFO, said, adding they could remain among a number of “headwinds” in the third quarter and across the half.
Fuel and logistics costs are others, the second of which Kuehneman said the “environment remains dynamic”.
In the wider picture, “we believe we have plans in place to continue to mitigate these headwinds”, which also include inventory adjustments in the ambient category.
“As we work through this adjustment, we do expect some near-term cost pressure primarily in the third quarter due to lower plant utilisation,” Kuehneman added. “However, this action supports a more efficient operating model going forward.”
Across Hormel’s operating segments, full-year sales in the retail section are expected to deliver flat to low single-digit growth, while foodservice is likely to post mid-single-digit growth. High single-digits are anticipated for the international division.
CEO Ettinger gave his thoughts on the outlook: “We will be looking at a full quarter of higher fuel expenses where our commodity market assessment right now is running above our original plan in terms of some of the cost inputs.
“And we will be doing some inventory rebalancing and having some of the operational changes that Paul mentioned. These factors really don’t change our view of the underlying strength of our business. And in reaffirming the range, we recognise that this still implies bottom-line growth in the second half, which we now expect to come primarily in Q4.”
Profit margins are also likely to come under pressure in the back half from the same headwinds, the Hormel team noted.
Framing comments around pricing that Hormel initiated in the second quarter in retail and foodservice to a benefit on margins, the group’s president John Ghingo said: “If you kind of look at the big picture, freight costs remain elevated, commodity costs remain elevated, we will see some impact on margins as a result of that rebalancing of inventory…and we still have work to do in retail and some of our brands that are not meeting our expectations.
“As we look at the next quarters, we look at the second half overall, the branded part of the retail business, we feel very good about the progression, we feel very good about our ability to drive consumption growth there, but it will be a bit of a noisy quarter in terms of overall impacts on net sales and volume.”
