Update: Hormel Foods 3Q profit up

Published 11:07 am Thursday, August 25, 2011

It appears Hormel Foods Corp. expectations of a “more moderate” third quarter were off.

Hormel’s fiscal third-quarter net income climbed 15 percent thanks to solid sales of its grocery items and Jennie-O turkey products, as well as strength abroad.

The company also lifted its full-year earnings outlook on Thursday due to its strong quarterly performance.

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“We are pleased to report improved earnings per share and sales for the quarter,” said Jeff Ettinger, chairman of the board, president and CEO of Hormel, in a press release. After the company reported a 20 percent increase in net earnings for the second quarter this year, Ettinger said he expected the second half of the year to be more difficult, mainly because of higher commodity prices and input costs.

To combat higher commodity prices in the third quarter, Hormel increased prices across the board, which Ettinger said was met with a positive reaction from consumers.

“Overall, the reaction to the price increase has been reasonable from our perspective,” Ettinger said in a conference call Thursday.

Following the 15 percent jump in earnings this quarter, Ettinger said the company has raised its guidance range to $1.70 to $1.75 per share from $1.67 to $1.73 per share. Analysts predict earnings of $1.71 per share for the year.

Hormel earned $98.5 million, or 36 cents per share, for the period ended July 31. That’s up from $85.4 million, or 32 cents per share, a year earlier. The performance surpassed the 34 cents per share that analysts polled by FactSet expected.

Revenue rose 10 percent to $1.91 billion from $1.73 billion, beating Wall Street’s $1.87 billion.

For the nine months ended July 31, net earnings were $356.9 million, up 24 percent from $287.8 million during the same period last year.

The company continues to see growth after a record-setting fiscal 2010. Hormel tallied $7.2 billion in total sales that year, an 11 percent increase from fiscal 2009.

In the first three quarters of fiscal 2011, the company boasted total sales of $5.8 billion, up 12 percent from that period in 2010.

Hormel’s third quarter net earnings have increased for the third consecutive time. Net earnings of $85.4 million in the third quarter of 2010 was an increase of 11 percent from 2009’s $77.2 million, and that was a 49 percent jump from 2008’s $51.9 million.

Like many companies, Hormel benefited from strong results overseas. Its “all other” segment, which is mostly made up of Hormel Foods International, reported a 35 percent revenue increase on stronger fresh pork exports and better performances by its international joint ventures.

The company’s grocery products segment — which comprises 13 percent of its total revenue — saw its revenue improve thanks to strong sales of SPAM and Mexican products from its MegaMex Foods joint venture. The unit also reported better sales of Hormel Compleats microwave meals.

Jennie-O Turkey saw its revenue rise 11 percent. The division makes up 17 percent of Hormel’s total revenue.

The refrigerated foods segment — which makes up more than half of Hormel’s total revenue — had a 10 percent increase in revenue due to sales of items such as its namesake pepperoni, bacon and party trays. Specialty foods revenue climbed 11 percent on better sales of store brand canned meats and sugar.