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Hormel Cuts FY13 Guidance

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After reporting a year-over-year increase in earnings for fiscal second quarter of 2013, food products company, Hormel Foods Corporation (HRL) expects its performance in the second half of the year to drop.  

Hormel recently reduced its earnings per share guidance for fiscal 2013 to the range of $1.88-$1.96 against $1.93-$2.03 expected earlier. A slowdown in the pork business, lower retail sales in the Refrigerated Foods segment along with higher input costs are to be blamed for the expected decline.

The Refrigerated Foods segment consists primarily of the processing, marketing and sale of branded and unbranded pork and beef products for retail, food service and fresh product customers. The pork business has been under pressure for the past few quarters. Sales in this segment dropped 2.0% year over year to $1.0 billion in the fiscal second quarter of 2013 due to lower revenue generation from the pork business coupled with higher grain costs. However, management expected an improvement in the same in the second half of fiscal 2013.  

However, Hormel expects sales improvement in other segments to partially offset the sales decline in the Refrigerated Foods segment. The recent acquisition of the Skippy peanut butter line is expected to contribute significantly to revenue generation in the coming quarters, along with Grocery Products and International & Other segments.

Hormel intends to elaborate on the new guidance during its Investor Day, scheduled for Jun 26, 2013. The stock currently carries a Zacks Rank #4 (Sell). However, other stocks that are performing well and are worth a watch include Pilgrim's Pride Corporation (PPC), Sanderson Farms, Inc. (SAFM) and B&G Foods Inc. (BGS), each carrying a Zacks Rank #1 (Strong Buy).

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