Will Input Costs Hurt Hormel Foods' (HRL) Q3 Earnings?

Hormel Foods Corporation (NYSE:HRL) is slated to report third-quarter fiscal 2019 results on Aug 22, before the opening bell. The company outperformed the Zacks Consensus Estimate in the trailing four quarters, with the average being 4.5%. Let’s see what’s in store for this renowned meat products company this time around.

Headwinds in Pork and Turkey Units are Worries

An unstable tariff environment has been a major deterrent for the company’s pork business. Notably, higher tariffs have been exerting pressure on fresh pork export volumes, sales and profits in the company’s international division. These factors are likely to mar the upcoming results.

In addition to the pork unit, the company’s turkey business has been witnessing headwinds. The turkey segment has been pressurized by retail declines. This in turn has been weighing on the Jennie-O Turkey Store segment’s performance. Such adversities are likely to persist and weigh on results in the to-be-reported quarter.

Hormel Foods Corporation Price, Consensus and EPS Surprise

Rising Costs Likely to Hurt

Input cost inflation is making matters sour for Hormel Foods. Notably, the African swine fever witnessed in China has been largely affecting hog and pork markets, resulting in increased input costs. This might hurt the company’s performance in the quarter to be reported. Management earlier stated that it expects input costs to remain high, and impact profits at Refrigerated Foods, Grocery Products and International categories in the second half of fiscal 2019. This mars expectations for the impending quarter.

Although the company has announced strong pricing actions across all segments, barring Jennie-O Turkey Store, these actions are likely to lag input cost inflation. That said, we expect such rising costs, and softness in turkey and pork categories to dent the company’s fiscal third-quarter performance.

Estimates Look Unappealing

The Zacks Consensus Estimate for earnings for the quarter to be reported is pegged at 36 cents, indicating a decline of 7.7% from 39 cents in the year-ago quarter. Notably, the Zacks Consensus Estimate has remained unchanged in the past 30 days.

The consensus mark for revenues is $2,321 million, implying a 1.6% decline from $2,359 million reported in the year-ago quarter.

Zacks Model

Our proven model doesn’t show that Hormel Foods is likely to beat bottom-line estimates in the to-be-reported quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Hormel Foods carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to beat estimates in the upcoming releases.

McCormick & Company (NYSE:MKC) has an Earnings ESP of +0.25% and a Zacks Rank #2.

Kimberly-Clark (NYSE:KMB) has an Earnings ESP of +0.43% and a Zacks Rank #2.

Conagra Brands (NYSE:CAG) has an Earnings ESP of +0.42% and a Zacks Rank #3.

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