Hormel Foods (HRL) Reports Mixed Earnings

Shares of Hormel Foods Corporation (HRL), stumbled recently after the food company reported mixed second quarter earnings. The company, which manufactures Spam luncheon meats, Skippy peanut butter and Jennie-O Turkey, reported adjusted earnings of $0.46 per share, or $125.5 million, a decline from the $0.48 per share, or $127.9 million, it reported in the prior year quarter. Although earnings per share came in higher due to share count, net income actually slid 2%.

Sales rose 6.9% year-on-year to $2.15 billion. Both its bottom and top line results came in short of the consensus estimate for earnings of $0.49 per share on revenue of $2.19 billion. Daily Chart
Hormel attributed its mixed earnings to its acquisition of Skippy from Unilever (UN) for $700 million in January, rising grain costs and lower turkey prices. The company's refrigerated foods segment, which accounts for nearly half of the company's top line, declined 2% due to higher grain costs. Its grocery products segment, which includes Spam and comprises 18% of its top line, rose 49% to $393.5 million, thanks to Skippy peanut butter, Spam, Dinty Moore stew and Mary Kitchen hash. Hormel's Jennie-O Turkey Store, which accounts for 18% of its top line, reported a 2% sales decline to $384.7 million due to higher grain costs and waning demand for turkey. Specialty Foods, its smallest segment, reported a 7% year-on-year increase to $245.7 million. Lastly, its international sales climbed 21.1% to $117.4 million thanks to international demand for its Spam products, especially in the emerging markets and Asia. In terms of operating profit, Hormel's Jennie-O Turkey Store fared the worst, with a 25.9% year-on-year decline, while Specialty Foods rose the most, with a 24.5% gain. Grocery Products' operating profit rose 10.4% while sales of its Refrigerated Foods gained 3.2%. Hormel's cash and equivalents notably plunged to $262.7 million, down from $887.7 million last quarter. However, its long-term debt remained unchanged at $250.0 million. Looking forward, Hormel expects demand for its Specialty Foods to cool off, but for sales and profits at its troubled Refrigerated Foods segment to improve. The company expects its Jennie-O Turkey Store to continue facing challenges, but the combined Thanksgiving and Christmas holiday season could generate higher sales later this year. The company expects full-year earnings of $1.93 to $2.03 per share, in line with analyst projections of $1.99 per share. Hormel currently trades at 17.6 times forward earnings with a 5-year PEG ratio of 1.8. The stock has a quarterly dividend yield of 1.70%, and has risen 35% over the past twelve months. Other News About HRL Hormel Profits Fall 4 Percent Hormel's bottom line dips. What Does Hormel Put into the Air? Is Hormel harming the environment? Other Stocks in the News Will April Showers Bring May Flowers for This Beverage Maker? Is Monster Beverage about to take off? Profiting in the Age of Instant Gratification Will AmazonFresh make Americans even lazier? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Jun 11, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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