Hormel profits edge up, beat expectations
Hormel Foods Corp. said Thursday that its fiscal second-quarter profit edged up 4 percent as the maker of Spam and Dinty Moore stews sold more canned meats and Mexican products to budget-conscious consumers.
The earnings results easily beat Wall Street's expectations and the company also known for its chili and Jennie-O Turkey products said its better-than-expected first half means it now expects full-year profit will come in at the upper end of its earlier estimates.
Shoppers appeared to gravitate toward Hormel's stews, Mexican products and other grocery items during the quarter because of their low cost. Many consumers have cut back or traded down on food items during the recession as they look for ways to trim costs and save more money.
"We have seen a continuation of some of the same trends we saw in the first quarter, as consumers seek value in retail channels while foodservice sales remain soft," Chairman, President and Chief Executive Jeffrey M. Ettinger said in a statement.
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Austin, Minn.-based Hormel earned $80.4 million, or 59 cents per share, for the period ended April 26, up from $77.6 million, or 56 cents per share, a year earlier.
Analysts surveyed by Thomson Reuters, whose estimates generally exclude one-time items, predicted profit of 50 cents per share.
Sales were essentially flat at $1.6 billion, as revenue from its grocery products division, which includes Spam and Dinty Moore stews, rose 4 percent.
But the results missed Wall Street's estimate of $1.68 billion.
Operating profit for the Jennie-O Turkey Store segment surged 42 percent on lower feed costs prompted partly by a planned cutback in turkey production. Hormel said the lower turkey production has helped it deal with reduced commodity meat prices by decreasing its market exposure.
At its refrigerated foods business, operating profit dropped 7 percent as foodservice sales weakened. But the meat products division reported increased sales of its Natural Choice lunch meats, Hormel Party Trays and Di Lusso Deli Co. products, which all posted double-digit increases.
"Our refrigerated foods segment experienced another difficult quarter, as continued weak cut-out margins led to losses in our pork operations," Ettinger explained.
Meanwhile the specialty foods segment's operating profit dipped 1 percent on softer sales of nutritional and ready-to-drink products at Century Foods International.
Hormel said it expects full-year profit at the upper end of its prior guidance for earnings of $2.15 to $2.25 per share.
Analysts anticipate yearly net income of $2.24 per share.
"Despite potential ongoing challenges, which could include continued negative cutout margins, export market issues and commodity cost pressures, we believe our strong portfolio of branded products, with many good value offerings, and the strength of our management team, will lead to a solid performance this year," Ettinger said.
(Copyright 2009 by The Associated Press. All Rights Reserved.)
