Hormel beats 1Q profit forecasts

Published 10:53 am Tuesday, February 16, 2016

Hormel Foods Corp. is starting 2016 on a strong note.

The Austin-based company reported fiscal first-quarter earnings Tuesday of $235.1 million, an increase of 25 percent over the $187.3 reported in the 2015 first quarter.



“We are pleased to report a double-digit earnings increase for the quarter, with four of our five segments posting earnings growth,” said Jeffrey Ettinger, chairman of the board and CEO, in a press release. “This marks our eleventh consecutive quarter of achieving record earnings results.”

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However, the Austin-based company saw sales of $2.3 billion, which were down 4 percent. Ettinger said the company’s sales were muted by turkey supply constraints in Jennie-O Turkey Store stemming from last year’s avian flu outbreak lower pricing due to declining pork markets. However, he said many products showed strong showings, including Hormel Gatherings party trays, Applegate natural breakfast sausage, Wholly Guacamole and Muscle Milk’s Pro Series.

Hormel said it had profit of 43 cents per share as it’s results topped Wall Street expectations. The average estimate of eight analysts surveyed by Zacks Investment Research was for earnings of 37 cents per share.

The maker of Spam canned ham, Dinty Moore stew and other foods posted revenue of $2.29 billion in the period.

Hormel expects full-year earnings to be $1.50 to $1.56 per share.

Ettinger credited the company’s innovation and acquisitions like Skippy, Applegate Farms and CytoSport for the company’s continued growth.

“Our commitment to investing in the sustained growth of the business is evident in our results,” Ettinger said in the release. “Our business performance continues to be influenced by our company-wide spirit of innovation, increased brand support, prudent capital investment, and portfolio-expanding acquisitions.”

Looking ahead, President and Chief Operating Officer James Snee said the company expects turkey production at Jennie-O to return to normal in the second quarter, and he expects favorable input costs to continue in Refrigerated Foods, Grocery Products and Specialty Foods.

Hormel shares have more than doubled since the beginning of the year, while the Standard & Poor’s 500 index has declined almost 2 percent. The stock has nearly tripled in the last 12 months.

Highlights of Hormel’s first quarter

—Grocery Products, which accounted for 17 percent of net sales, increased 26 percent over adjusted 2015 results, thanks in part to favorable raw material costs and improved plant efficiencies. Segment profit increased 58 percent as compared to 2015 GAAP segment profit.  Sales fell 4 percent, with overall softer results partially offset by increased sales of Wholly Guacamole refrigerated dips and Hormel bacon toppings.

—Refrigerated Foods, which accounted for 51 percent of net sales, saw profit increase 65 percent thanks in part to higher pork operating margins. Dollar sales increased 2 percent with the addition of the Applegate business, growth of retail products including Hormel Cure 81 bone-in hams and Hormel refrigerated entrees, and increased sales of foodservice products such as Old Smokehouse bacon and Hormel Natural Choice deli meats.

—Jennie-O Turkey Store, which accounted for 16 percent of net sales, is still feeling the effects of avian influenza. It saw segment profit decline 2 percent and sales drop 15 percent. Hormel says reductions came after previously lost flocks created significant volume shortfalls in plant operations and sales.

—Specialty Foods, which accounted for 10 percent of net sales, saw a 44 percent segment profit increase. Results reflect favorable input costs and synergies captured within the CytoSport and Century Foods supply chain. Sales decreased 10 percent as increased sales of Muscle Milk products didn’t fully offset lower sales of sports nutrition contract packaging.

—International & Other, which accounted for 6 percent of net sales, posted a segment profit increase of 1 percent over adjusted 2015 results, while sales were down 7 percent. Segment profit increased 69 percent as compared to 2015. The company said results stemmed from unfavorable currency rates and softer sales in key markets, which offset Skippy peanut butter sales gains.

The Associated Press contributed to this story