tapebrief
HRL · Q2 2025

HRL · Q3 2025 Earnings

Bearish

Hormel Foods

Reported August 28, 2025

30-second summary

Hormel posted Q3 revenue of $3.03B (+4.6% YoY) and organic net sales growth of 5.7% — well above the low single-digit guide — but adjusted EPS of $0.35 was flat as ~400bps of raw-material inflation absorbed both organic leverage and Transform & Modernize savings. Management withdrew every FY2025 quantitative metric (revenue $12.0–$12.2B, adj. EPS $1.58–$1.68, GAAP EPS $1.49–$1.59, tax rate, capex) and deferred FY2026 guidance to the Q4 call, while explicitly disowning the 2023 Investor Day targets — "our long-term growth algorithm is a better metric." The Q4 guide ($3.15–$3.25B revenue, $0.38–$0.40 adj. EPS, $0.36–$0.38 GAAP EPS) embeds continued margin pressure into Q1 FY2026. T&M is the lone fully-quantified commitment left standing: management reaffirmed $100–150M and now expects to finish near the high end.

Headline numbers

EPS

Q3 FY2025

$0.35

Revenue

Q3 FY2025

$3.03B

+4.6% YoY

Gross margin

Q3 FY2025

16.1%

Free cash flow

Q3 FY2025

$0.09B

Operating margin

Q3 FY2025

7.9%

Key financials

Q3 FY2025
MetricQ3 FY2025YoYQ2 FY2025QoQ
Revenue$3.03B+4.6%$2.90B+4.5%
EPS$0.35—$0.35+0.0%
Gross margin16.1%—16.7%-60bps
Operating margin7.9%—8.6%-70bps
Free cash flow$0.09B———

Guidance

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ3 FY2025low single-digit growth (qualitative)$3.03 billion+4.6% YoY actual vs. low single-digit guidanceBeat
Organic Net Sales GrowthQ3 FY2025low single-digit growth (qualitative)5.7%+1.7-4.7pts above low single-digit rangeBeat
Retail Net Sales GrowthQ3 FY2025low single-digit5.2%in-line with low single-digit rangeMet
Foodservice Organic Net Sales GrowthQ3 FY2025mid single-digit3.5%-1.5 to -3.5pts below mid single-digit rangeMissed
International Net Sales GrowthQ3 FY2025high single-digit5.8%in-line with high single-digit range; volume growth of 8.4% exceededBeat

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Adjusted Diluted EPS
FY2025
$1.58 - $1.68not yet narrowed in current guidance—Lowered
Revenue
FY2025
$12.0 - $12.2 billionWithdrawn — no replacement—Withdrawn
Organic Net Sales Growth Rate
FY2025
2% to 3%Withdrawn — no replacement—Withdrawn
Diluted EPS (GAAP)
FY2025
$1.49 to $1.59Withdrawn — no replacement—Withdrawn
Transform and Modernize Benefits
FY2025
$100 million to $150 millionWithdrawn — no replacement—Withdrawn
Effective Tax Rate
FY2025
22.0% to 23.0%Withdrawn — no replacement—Withdrawn
Capital Expenditures
FY2025
—Withdrawn — no replacement—Withdrawn

Segment performance

Q3 FY2025
SegmentQ3 FY2025YoY
Retail$1.858B+5.2%
Foodservice$0.987B+3.5%
International$0.187B+5.8%

Platform metrics

Q3 FY2025
SegmentQ3 FY2025
Organic Net Sales Growth5.7%
Retail Volume Growth4.8%
Foodservice Organic Volume Growth2.1%
International Volume Growth8.4%
Transform and Modernize Initiative Projects~90 projects delivering measurable value

Profitability

Q3 FY2025
SegmentQ3 FY2025
Adjusted Operating Margin8.4%
Operating Cash Flow$157 million

Other KPIs

Q3 FY2025
SegmentQ3 FY2025
Dividends Returned to Shareholders$159 million

Management tone

Q1 (confident execution) → Q2 ("responsibly narrowing" with strained consumer) → Q3 (FY guide withdrawn, 2026 targets disowned).

The 2023 Investor Day framework was effectively retired this quarter. Three months ago management was still defending the FY2025 narrowed band and pointing to 2026 long-term goals. This quarter: "The growth goals we previously set for 2026 were based on certain assumptions that have not been realized... our long-term growth algorithm is a better metric to use when considering our go-forward results." Pivoting from specific dollar targets to an unquantified "algorithm" (2–3% sales / 5–7% operating income) lets management miss the 2026 numbers without ever formally missing them.

Commodity inflation moved from "managed pass-through" to "absorbed everything." Q2's prepared remarks treated input costs as a known pass-through that pricing and T&M would offset. Q3's language: "The unanticipated surges in commodity input costs that affected our industry absorbed not only the margin delivery from our top-line growth, but also our incremental benefits from our T&M initiative" — with 400bps of raw-material inflation in Q3 alone (pork bellies +30%, pork cutout +10%, pork trim +20%, beef near all-time highs). The acknowledgment that T&M savings were entirely consumed is new.

Margin recovery timeline pushed out by at least two quarters. Q2 framed back-half acceleration as the bridge to the $1.58–$1.68 EPS range. This quarter, CFO Jacinthe Smiley: "we expect profit recovery to lag into next year, with the near-term pressures we experienced in the third quarter persisting through the fourth quarter." Pricing actions announced in Q3 will benefit "the latter part of Q4 and into 2026" — meaning Q1 FY2026 is now also a transition quarter, not a recovery quarter.

Planters narrative bifurcated into "top-line working, profit not." Q2 positioned Planters as a back-half profit driver. Q3: "Profit on planters did grow in the third quarter, but not at the same rate as the top line has grown in that recovery... Profitability, on the other hand, is being impacted by mix and inflation." The volume/distribution recovery is real but the margin thesis is intact in name only.

Explicit acknowledgment of investor disappointment, which is unusual for Hormel. Ettinger: "It is clearly disappointing that our top line results did not translate into the bottom line growth we expected." Pairing that with FY withdrawal and the deferred 2026 framework signals management knows the credibility cost and is choosing to take it now rather than walk down a range a third time.

Recurring themes management leaned on this quarter:

Unexpected and severe commodity cost inflation (400bps in Q3 alone)Top-line growth delivered (6% organic, three consecutive quarters) but not translating to bottom-line earningsDelayed benefit from pricing actions and lag between cost increases and price realizationFood service industry traffic remains soft, below expectationsTransform and Modernize initiative tracking on schedule but benefits masked by external cost pressuresPortfolio strength (protein-centric positioning) providing resilience despite margin compression

Risks management surfaced:

Commodity market volatility (pork bellies up ~30%, pork cutout up ~10%, pork trim up 20%, beef near all-time highs)Food service industry traffic weakness and operator headwinds persistingConsumer sentiment cautious amid rising costs forcing trade-offsBrazil business under significant competitive pricing pressureTariff headwinds (1-2 cents EPS for FY2025)Planters margin recovery lagging revenue momentum

Q&A highlights

Leah Jordan · Goldman Sachs

Pricing dynamics in retail: Why wasn't pricing a top-line driver despite value-added turkey pricing? What is the company's elasticity planning for targeted pricing actions, and how much of the portfolio will be impacted in Q4 vs 1Q 2026?

Management explained that pricing in food service generally passes through based on commodity movements with timing lags. In retail, pricing decisions require balancing three variables: commodity costs/COGS, anticipated consumer response, and brand health. Turkey pricing was successfully implemented in Q3 with ground turkey up 13%, recovering needed margins. Recent targeted pricing actions announced will benefit Q4 and 2026. Management remains measured and disciplined to maintain brand health and consumption growth.

Ground turkey sales up 13% in latest 13 weeksFlagship and rising brands consumption growth over 3%Total Hormel consumption growth of 1.5%Pricing benefits will begin in latter part of Q4 and into 2026

Peter Galbo · Bank of America

Price-cost lag timing: When will the company achieve parity between price and cost, particularly given potential unfavorable market dynamics through 1H 2026? Also, why did the company build inventory at peak commodity cycle and is there a visibility problem on costs?

Management acknowledged price-cost lag will persist, stating they will eventually catch up but lag timing depends on market direction (fares better when markets decline). In retail, pricing adjustments will be measured and balanced with trade promotion. On inventory, management clarified the build was intentional to service customer demand, fill rate improvements, and back-to-school needs—not a problem. New CFO deferred comment on past inventory decisions but stated current approach is intentional.

Price-cost lag will persist into at least 1Q 2026Sharp market run-ups are harder to navigate than declinesInventory build was intentional and not elevated relative to commodity cost increasesFill rates were previously low and needed improvement

Michael Lavery · Piper Sandler

Three-year plan review: The company set targets for P&M savings and net EBIT growth 18 months ago but hasn't explicitly updated them. Should investors assume these targets remain valid, or are they under review given changed assumptions?

Management stated that targets from the previous investor day were based on assumptions that have materially changed: elevated commodity markets were not anticipated, a strong 2H 2025 was expected but consumer is pressured, and Planters recovery has lagged on profitability. They will provide a robust update on the Q4 call regarding the three-year plan targets.

Previous investor day assumptions no longer holdSignificant rising commodity markets were not anticipatedExpected strong 2H 2025 did not materialize due to consumer pressurePlanters profitability recovery is lagging

Erica Ilan · Oppenheimer

Long-term profitability: The business was double-digit operating margin historically. Does management still view this as a double-digit margin business over time? What are the paths to improve profitability?

New CFO Jeff deferred on specific margin targets but outlined encouraging signs: sales momentum (6% growth), mix enhancement opportunities, pricing benefits coming Q4/Q1, TNM projects with pending updates, manufacturing efficiencies materializing from plant relocations, and SG&A control (currently up 6%, aiming to not outpace sales growth). Focus on food service margin advantages and flagship/rising brand prioritization to improve mix.

Current sales growth at 6%SG&A up 6% this quarter; goal is to not outpace sales growthFood service has stronger marginsTrailing benefits from manufacturing moves still materializing

Puran Sharma · Stevens

Hog market supply: Production has been lackluster despite expectations. With breeding herd reductions and efficiency gains, how does management view intermediate-term hog supply prospects?

Management noted they have long-term supply agreements that secure adequate supply in line with customer demands. Acknowledged pork producers are currently in profitable mode, which should support increased supply longer-term, though near-term supply may be constrained. On turkey, ground turkey is performing very well with strong demand, double-digit branded growth outpacing category, gaining market share, and strengthening brand position.

Company has long-term supply agreements for hog contractsPork producers in highly profitable mode currentlyGround turkey demand remains strongGround turkey branded growth in double digits

Answers to last quarter's watch list

Q3 adj. EPS in the low-double-digit growth range. Adj. EPS came in at $0.35, roughly flat YoY versus the implied ~$0.41 (low double-digit growth off prior-year $0.37). The miss invalidated the FY $1.58–$1.68 range, which management then withdrew rather than narrow further. Status: Resolved negatively
Retail volume trajectory turning positive. Retail volume grew +4.8% with revenue +5.2% — the cleanest segment beat in the quarter and a clear swing from Q2's -0.3% revenue. Planters distribution and turkey pricing both showed through in reported volumes. Status: Resolved positively
Foodservice organic volume returning to positive. Organic volume came in at +2.1% — positive vs. Q2's -1.1%, with organic net sales growth of +6.7% meeting the mid single-digit guide. Industry traffic "did not recover the way we expected," but the underlying portfolio outpaced. Status: Resolved positively
Turkey market dynamics from competitor closures. Ground turkey sales +13% in latest 13 weeks with branded growth in double digits and market share gains — the share capture is materializing earlier than the Q4-weighted thesis suggested. However, the turkey strength was insufficient to offset broader pork/beef inflation. Status: Resolved positively on share, but the margin contribution was absorbed by other costs.
T&M delivered savings vs. the $100M–$150M FY range. Smiley reaffirmed the $100–150M range and stated the company expects to finish near the high end, with ~90 projects executed in the quarter. The financial commitment is intact even as the broader FY framework was withdrawn. Status: Resolved positively
Whether 1–2 cents of tariff assumption proved sufficient. Tariff headwinds remain a 1–2 cent FY2025 EPS impact per management's commentary — the assumption held. Status: Resolved positively (within prior range)

What to watch into next quarter

Q4 adj. EPS landing within $0.38–$0.40, GAAP within $0.36–$0.38, and revenue within $3.15–$3.25B. A miss on the now-much-narrower forward guide one quarter after withdrawing the FY range would compound the credibility problem materially.

The "holistic 2026" framework on the Q4 call — specifically whether management provides a quantitative EPS range or pivots fully to the 2–3% sales / 5–7% operating income algorithm without a dollar anchor. The latter signals targets aren't recoverable and should be valued as a structural margin reset.

Q1 FY2026 commodity environment vs. management's "pressures persist into next year" language. Pork belly, cutout, and trim trajectories matter more than any management commentary; the timing of when realized input costs decelerate determines when the announced pricing actions actually expand margin.

T&M dollar disclosure on the Q4 call for FY2026. With FY2025 tracking to the high end of $100–150M, the question is whether the program continues to carry a quantified benefit range into 2026 or shifts to a qualitative contribution.

Foodservice organic volume — whether +2.1% accelerates or whether industry traffic stays soft. Foodservice carries the highest segment margins; sustained sub-mid-single-digit organic volume caps any margin recovery path.

Planters profit growth rate vs. revenue growth rate. Management acknowledged the gap this quarter; a closing gap by Q4 is required for the Planters thesis to remain intact.

Sources

  1. Hormel Foods Q3 FY2025 Earnings Release (SEC filing): https://www.sec.gov/Archives/edgar/data/48465/000004846525000042/hormelearningsreleaseq32025.htm
  2. Hormel Foods Q2 FY2025 Earnings Release: https://www.hormelfoods.com/newsroom/press-releases/hormel-foods-reports-second-quarter-fiscal-2025-results/

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