Shares of Hormel Foods(NYSE: HRL) got knocked down on Wednesday after the company reported financial results for its fiscal third quarter of 2024. As of 10:30 a.m. ET, Hormel stock was down 8% and getting close to nine-year lows.
The outlook drops for Hormel
In Q3, Hormel's net sales of $2.9 billion were down 2% year over year, more than what Wall Street had expected. That said, the company's net income of $177 million was up nearly 9% and ahead of estimates. Normally, the profit outperformance would lift the stock price. But investors are responding negatively to a big change in management's financial guidance.
Hormel's management had guided for full-year net sales of $12.2 billion to $12.5 billion. But now, management expects net sales of $11.8 billion to $12.1 billion, a reduction of 1% to 5%. That may sound like a small adjustment, but keep in mind that Hormel just reported Q3 results, meaning the fiscal year is almost over.
In the second quarter, Hormel's management reaffirmed its guidance. But now it's lowering guidance with only a quarter to go. Investors don't like seeing such a sudden change, and that's why the stock is down today.
Is Hormel stock safe?
At 3.7%, the dividend yield for Hormel stock is approaching an all-time high, suggesting that investors are a little worried about this investment. However, Hormel is a Dividend King with over 50 years of consistently paying and raising its dividend. It's true that sales are in a slump and its payout ratio is rising, which aren't good things. But I believe it's likely to find a way to grow earnings and preserve future dividend payouts.
As a mature business, Hormel won't likely make flashy adjustments. But ongoing improvements in its international segment and synergies in its retail segment could help in coming quarters.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
