Hormel Foods Stock Sinks as Spam Maker Issues Soft Outlook on ‘Commodity Inflation’

Shares of Hormel Foods (HRL) dropped sharply in premarket trading Thursday after the Spam maker said it expects “near-term pressures” continuing through the current quarter.

The Austin, Minn.-based company reported fiscal third-quarter sales that increased nearly 5% year-over-year to $3.03 billion, topping the $2.98 billion consensus projection of analysts surveyed by Visible Alpha. However, adjusted earnings per share of $0.35 came up short of the $0.41 estimate.

The company’s results “were disappointing, and we fell short of our expectations,” said interim CEO Jeff Ettinger. “The steep rise in commodity input costs affecting our industry was the largest contributor to our shortfall.”

For the current quarter, Hormel sees adjusted EPS between $0.38 and $0.40, well below the $0.49 consensus, and sales between $3.15 billion and $3.25 billion, with the midpoint lower than expectation.

“To address commodity inflation, we are taking targeted pricing actions,” Ettinger said. “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.”

Hormel Foods shares sank more than 10% before the opening bell. Entering Thursday, they had lost about 7.5% of their value this year.