Hormel reports 17% earnings increase for second quarterPublished 7:00am Wednesday, May 23, 2012
After two quarters of decline, Hormel Foods Corp. rebounded with a 17 percent second-quarter profit increase, boosted by strong results at its Jennie-O Turkey Store business and higher demand for Spam.
In a report released today, Hormel recorded net earnings of $127.9 million for the second quarter of fiscal 2012, a substantial jump from $109.6 million a year earlier, or 48 cents per share compared to 40 cents per share last year. For the six months ending April 29, net earnings were $256.3 million, down 1 percent from net earnings of $258.4 million the same period last year.
Sales for the quarter were $2.01 billion, up 2.7 percent from $1.96 billion in fiscal 2011. For the six months ended April 29, sales totaled $4.1 billion, up 4 percent from the same period last year.
The profit beat Wall Street predictions, and the company backed its full-year profit prediction. Hormel shares rose more than 6 percent in premarket trading. Analysts, on average, expected a profit of 42 cents per share on $2.04 billion in revenue, according to a FactSet poll.
“We are pleased to report record earnings and sales for the second quarter,” said Hormel CEO and President Jeff Ettinger in a news release. “This is a good example of our balanced business model in action, as we were able to increase earnings in four out of five segments.”
Jennie-O — which accounts for 20 percent of Hormel’s net sales — had an excellent quarter, with the segment’s operating profit up 50 percent from a year ago. Jennie-O’s net sales for the quarter rose 7 percent, led by sales of Jennie-O retail tray packs and turkey burgers.
“Our Jennie-O Turkey Store segment delivered another outstanding quarter, driven by value-added sales growth,” Ettinger said in the release.
Hormel reported a 14 percent decrease in net earnings in the first quarter of this year and a 3 percent drop in the fourth quarter of last year.
Still, the company continues on an upward trend. While the first quarter earnings were below the first quarter of 2011, it was still the second best in the company’s history, according to Ettinger. And before those two quarters, Hormel reported 10-consecutive quarters of growth.
Looking forward, Ettinger sees reasons for optimism.
“Our second quarter results provide positive momentum heading into the back half of the year,” Ettinger said in the release. “We believe continued weaker pork operating margins will be more than offset by stronger results from our other segments. We expect sales in the center of the store to slowly improve as we continue our advertising support of our Hormel and Spam brands.”
Ettinger said the company is maintaining its full-year earnings guidance range of $1.79 to $1.89 per share.
Of Hormel’s five segments, four saw growth in net earnings and total sales. Only the company’s refrigerated foods segment — which includes its Natural Choice deli meats and Hormel pepperoni and party trays — declined from the second quarter of 2011. That segment, which accounts for 51 percent of net earnings, dropped 25 percent from 2011, which Hormel attributes to lower pork operating margins. Net sales for the quarter declined 1 percent.
The company’s “other” division, which mainly consists of its international business and accounts for about 5 percent of sales, posted a 52 percent jump in profit and 11 percent increase in sales, mainly as a result of strong exports of Spam and fresh pork products.
Strong demand for Spam, along with lower pork and beef costs also helped boost profit at the company’s grocery division up 10 percent, the company said.
Profits for the specialty foods segment, which accounts for 11 percent of net sales, rose 9 percent and its net sales were up 12 percent.
—The Associated Press contributed to this report.