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Hormel Beats on Q4 Earnings & Sales

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Consumer goods company, Hormel Foods Corporation (HRL), posted earnings per share of 58 cents in the fourth quarter of fiscal 2013 (ended Oct 27, 2013), up 18.4% from the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of 54 cents by 7.4%. The rise in earnings was led by improved revenues and margins.

In fiscal 2013, Hormel generated earnings per share of $1.95, a hike of 4.8% from $1.86 a year ago. Results beat the Zacks Consensus Estimate of $1.92 per share by 1.6%.

Sales: Hormel’s net sales for the reported quarter were $2,323.2 million, up 7.1% year over year. Revenues also surpassed the Zacks Consensus Estimate of $2,309.0 million. The year-over-year increase was mainly driven by improvement in all the segments except the Specialty Foods segment, as well as the recent acquisition of the Skippy peanut butter line. Total volume was up 3.0% year over year.

Segment Revenues: During the reported quarter, revenues from the Grocery Products segment rose 23.3% year over year to $419.6 million, and the Jennie-O Turkey Store segment witnessed a revenue rise of 7.1% to $459.7 million. The Refrigerated Foods segment’s revenues increased 4.2% year over year to $1,108.2 million. Similarly, revenues from the International & Other segment climbed 37.9% to $123.3 million. However, revenues from the Specialty Foods segment dropped 14.1% to $212.5 million.

In fiscal 2013, revenues amounted to $8.8 billion, registering an increase of 6.3% year over year. Also, revenues beat the Zacks Consensus Estimate of $8.7 billion.

Income/Costs: Hormel’s gross profit for the fourth quarter of fiscal 2013 was $385.5 million, up 9.6% from $351.8 million in the comparable quarter last year. Operating profit margin in the quarter expanded roughly 103 basis points year over year to 10.3%.

In the reported quarter, operating profits from the Grocery Products segment increased 17.0%, while the Refrigerated Foods segment registered a rise of 29.9% year over year. Operating profits for the Specialty Foods segment reduced 33.7% in the quarter, year over year. Operating profit for the Jennie-O Turkey Store segment improved 25.5% and the International & Other segment’s profit jumped 82.0% year over year.

Balance Sheet: At the end of the reported quarter, the company recorded cash and cash equivalents of $434.0 million, up from $329.5 million at the end of the preceding quarter. Long-term debt (less current maturities) stood at $250.0 million at the end of the quarter, flat compared with the earlier quarter.

The company paid a quarterly dividend of 17 cents on Nov 15, 2013, representing the 341st straight dividend payout by the company.

Additionally, management announced an 18.0% increase in annual dividend to 80 cents in fiscal 2014, marking an increase for the 48th consecutive year.

Outlook: Management expects to benefit from the continued improvement in sales across all the segments. Moreover, the Specialty Foods segment is also expected to recover from the loss of a major customer in the fourth quarter of fiscal 2013.

Lower grain and turkey commodity prices are expected to be in the company’s favor, while high beef input costs and uncertainty of hog supplies will offset these benefits to some extent. In view of the same, management projects its earnings per share in fiscal 2014 in the range of $2.17 to $2.27.

Other Stocks to Consider

Hormel currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the food sector include Omega Protein Corp. (OME), ConAgra Foods, Inc. (CAG) and The Hain Celestial Group, Inc. (HAIN). While Omega Protein has a Zacks Rank #1 (Strong Buy), ConAgra and Hain Celestial Group hold a Zacks Rank #2 (Buy).

Read the Full Research Report on HRL
Read the Full Research Report on HAIN
Read the Full Research Report on CAG
Read the Full Research Report on OME

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