Hormel Foods 3Q Profit Up, Lifts Full-Year Outlook
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AUSTIN, Minn. (AP) — Hormel Foods Corp.’s third-quarter net income climbed 15 percent as it charged more for its products and its overseas revenue rose, beating Wall Street’s expectations.
The food maker also boosted its outlook for the full year, but investors were concerned that Hormel sold roughly the same volume of products in this year’s third quarter and last year’s, and its shares fell.
Hormel, which makes Dinty Moore stew, Jennie-O Turkey products, Hormel meats and other foods, earned $98.5 million, or 36 cents per share, for the period that ended July 31. That’s up from $85.4 million, or 32 cents per share, a year earlier. All per-share results are adjusted to reflect a 2-for-1 stock split that went into effect Feb. 1.
Its revenue rose 10 percent to $1.91 billion.
Analysts on average expected adjusted earnings of the 34 cents per share and revenue of $1.87 billion, according to FactSet.
Hormel’s shares fell $1.76, or 6 percent, to $26.74 by early afternoon.
Most food makers, including Hormel, have raised prices to cope with higher costs for ingredients and packaging. That produced higher revenue, but Hormel’s sales volume was flat for the quarter as some shoppers resisted the price hikes.
Hormel said revenue from its grocery products segment — which comprises 13 percent of its total revenue — rose 4 percent thanks to strong sales of SPAM and Mexican products from its MegaMex Foods joint venture and higher sales of Hormel Compleats microwave meals.
Jennie-O Turkey revenue rose 11 percent. And the unit that includes Hormel Foods International reported 35 percent higher revenue, thanks in part to exporting more fresh pork.
Refrigerated foods — which produce more than half of Hormel’s revenue — performed more poorly. The unit’s revenue rose 10 percent, but its operating profit fell with lower pork margins. Specialty foods revenue climbed 11 percent on better sales of store brand canned meats and sugar, but its operating profit fell as ingredient costs rose.
Hormel leaders said they were not “overly concerned” about sales volume flattening during the period and said the reaction to price increases was reasonable. They said if the company continued to drive growth with pricing and its mix of products, its revenue will grow the way it hopes.
Hormel, based in Austin, Minn., now expects 2011 earnings of $1.70 to $1.75 per share, up from $1.67 to $1.73 per share. Analysts predict earnings of $1.71 per share for the year.
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