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Hormel's EPS In Line, Revs Beat

Zacks Equity Research

Hormel Foods Corporation (HRL) posted earnings per share of 41 cents in the third quarter of 2012, in line with the Zacks Consensus Estimate. The quarter’s earnings also increased 14% from 36 cents per share reported in the prior-year period.

Net earnings reached $111.2 million, up from $98.5 million in the third quarter of 2011.

Net sales for the reported quarter were $2,008.2 million, up 5.1% year over year and ahead of the Zacks Consensus Estimate of $1,994 million. The year-over-year increase reflected sales gain across four of the company’s five segments.

During the reported quarter, revenue from Grocery Products improved 21.1% year over year and Jennie-O Turkey Store witnessed revenue growth of 7.3%. However, the Refrigerated Foods segment registered a decline of 0.2% in revenue annually based on lower pork operating margins. On the other hand, Specialty Foods revenue increased 11.1% while revenue from all other items crept up 1.8% during the reported quarter.

Operating profit for Grocery Products for the reported quarter increased 31.6% while Refrigerated Foods registered a rise of 6.9% year over year. Operating profit for Jennie-O Turkey Store jumped 12.2%, led by higher retail value-added sales. Specialty Foods surged 18.5% year over year.

Gross profit for the third quarter of 2012 was $307.1 million, up from $297.9 million in the comparable quarter last year. Selling, general and administrative (SG&A) expenses were down 7.4% year over year to $145.0 million in the quarter.

Exiting the third quarter, net cash provided by operating activities was recorded at $284.1 million compared with $319.4 million in the year-ago quarter. At the end of the reported quarter, the company recorded cash and cash equivalents of $533.2 million, up from $497.4 million at the end of the comparable quarter last year. Long-term debt (less current maturities) stood at $250 million at the end of the quarter.


Hormel maintained its full-year earnings guidance of $1.79 to $1.89 per share, anticipating positive sales momentum and value-added portfolio.

The company paid a dividend of 60 cents on August 15, 2012, representing 336th straight dividend payout by the company.

Based in Austin, Minnesota, Hormel Foods Corporation is a leading manufacturer and marketer of various meat and food products in the United States and internationally. The company faces stiff competition from ConAgra Foods Inc. (CAG), Kraft Foods Inc. (KFT) and Tyson Foods Inc. (TSN).

We currently maintain a long-term Neutral recommendation on the stock. Hormel has a Zacks #4 Rank, which translates into a short-term (1-3 months) ‘Sell’ rating.

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