Hormel (HRL) Q2 2026 Earnings Report
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On May 28th HRL released their Q2 2026 earnings.
The stock popped ~12.5% on the strong results.
Hormel beat bottom line expectations by a wide margin despite all the unforeseen headwinds and management is confident they will hit full year targets.
Lets get into what happened, where they are going, and how much upside they still have left.
Financials & Data
Revenue came in up 3.3% on a like for like basis with organic net sales up 3% marking the 6th consecutive quarter on strong protein demand.
By segment:
Retail organic net sales was up 1% on double digit Jennie-O growth, offset by an exit from some snack nut lines. Applegate natural and organic meats, Hormel Black Label bacon, the Herdez portfolio, and Hormel Gatherings also contributed to the growth.
Segment profit grew 13% in the quarter.
Despite their really strong performance management felt they have room to do better. Saying size/pricing, promotions, and better in store and e-commerce execution are all areas they see opportunity to improve for brands including Planters and Skippy.
Foodservices was up 7% which was the 11th consecutive quarter of organic growth and the strongest performers were Hormel Natural Choice meats, Austin Blues smoked meats, Jennie-O turkey and Fontanini Italian meats.
Segment profit grew 11% YoY.
They performed well in the face of lower restaurant traffic because they have innovated to address problems their customers are facing. Simply put they are good at making things people want and have the flexibility to move to where opportunities are.
International was up 5% led by SPAM and growth in their China business.
Segment profit grew 20% YoY.
Gross Margins improved to 17.44% in the quarter up from 16.71% last year with gross profits growing 7% YoY.
OCF Margins came in at 6%, 4% better than last year.
FCF flipped positive to $96.7M in the quarter vs -$19M last year bringing the last 6 months of FCF to $377M vs $218M last year. That’s 73% growth.
Adjusted EPS came in at $0.40, 11% above estimates of $0.36, and up 14% YoY.
Margins benefited from price raises, better mix, increased productivity, and past restructuring actions. All of which will continue through 2026.
Another tailwind specifically for Q2 was improvements in the supply chain of their turkey operations from higher volumes and better weather helping both retail and food service profits.
Going back to the important price hikes, management did note that elasticities, which just means how consumer demand changed after prices hikes, was in line with expectations.
Offsetting some of these improvements were high pork, beef and logistics expenses. Though management did say logistics was not as large as expected and pork and beef were in line with expectations.
Balance Sheet is still rock solid with ~$827M of cash vs ~$2.85B of total debt putting them at net debt to EBITDA of 1.7x.
Looking Forward
Full year guidance was maintained despite the energy and logistics headwinds with management confident they will hit full year targets and even say they are “trending toward the upper half” of their earnings guidance.
As it stands guidance already incorporates headwinds from pork, beef, energy/logistics costs, and a $50M reduction in sales from their turkey business divestiture.
By segment for the year retail is expected to grow flat to low single digits, foodservice mid single digits, and international high single digits.
The two adjustment to guidance they did make was first to GAAP EPS for a $61M loss on the sale of their whole bird turkey business. And second they walked back their expectations of falling input prices from pork in the second half of the year to more expecting flat but elevated levels YoY.
Going into Q3 they expect earnings to be flat YoY because of high commodity prices, logistics expense, and inventory rebalancing. They were clear though these costs are only affecting quarterly cadence not full year expectations with Q3 retail being particularly messy. That segment is affected by inventory balancing, the divestiture of their whole bird unit, the divestiture of Justin’s, and exiting some snack nut lines.
Management was clear that logistics costs from higher energy are above their expectations but the business has been performing so well and they are making some tweaks to their operations that they are easily dealt with. It does pressure their Q3 but overall they are very confident they can deliver results.
Looking medium term a key focus is integrating technology allowing them to move faster to take advantage of trends and opportunities. To make this happen during the quarter they hired their first ever Chief Technology Officer, Donald Monk.
Long term targets of 2-3% net organic sales growth and 5-7% operating income growth are still targets though 2026 profit is guided to beat that.
Here is a quick map of what to expect based on managements guidance over the coming years.
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