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Hormel Foods Corporation (HRL - Analyst Report), a food company, posted adjusted earnings per share (excluding one time charge on account of take-over of Skippy peanut butter line) of 49 cents in the second quarter of fiscal 2013 (ended Apr 28, 2013), in line with the Zacks Consensus Estimate. Earnings were a penny higher than the year-ago quarter.

However, taking into consideration the Skippy peanut butter acquisition costs, the earnings per share for the reported quarter were 46 cents.

Sales: Hormel’s net sales for the reported quarter were $2,152.7 million, up 6.9% year over year; but lagged slightly behind the Zacks Consensus Estimate of $2,173.0 million. The year-over-year increase was mainly led by the Grocery Products segment, where the sales of Skippy peanut butter line were registered. Also, the total volume was up by 4.0%.

During the reported quarter, revenue from Grocery Products improved 49.1% year over year to $393.5 million, while Jennie-O Turkey Store witnessed a revenue fall of 1.6% to $384.7 million. The Refrigerated Foods segment registered a decline of 2.0% in revenue to stand at $1,011.4 million. On the other hand, Specialty Foods revenue swelled 7.3% to $245.7 million while revenue from International & Other segment crept up 21.1% to $117.4 million during the reported quarter.

Income/Costs: Hormel’s gross profit for the second quarter of fiscal 2013 was $352.8 million, up 5.1% from $335.6 million in the comparable quarter last year. Operating profit margin in the quarter decreased 99 basis points year over year to 8.7%, due to an increase in the acquisition costs.

Operating profit for Grocery Products for the reported quarter increased 10.4% while Jennie-O Turkey Store registered a decline of 25.9% year over year. Operating profit for Specialty Foods jumped 24.5%. International & Other segment’s profit surged 21.5% year over year. Operating profit for the Refrigerated Foods segment increased 3.2% in the quarter.

Balance Sheet: At the end of the reported quarter, the company recorded cash and cash equivalents of $262.7 million, down from $887.7 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 preceding quarter.

The company paid a dividend of 68 cents per share on May 15, 2013, representing 339th straight dividend payout by the company.

Outlook: Management expects Grocery Products and International & Other segments to continue prospering in the coming quarters, with a contribution from the Skippy peanut butter line. However, Specialty Foods segment is likely to lose business in the latter half of fiscal 2013. Refrigerated Foods segment, which is going through difficult times at present, is expected to improve in the future. Jennie-O Turkey Store segment will continue to face headwinds. Based on these factors, Hormel maintains its earnings estimates for fiscal 2013 in the range of $1.93-$2.03.

Hormel currently holds a Zacks Rank #2 (Buy). Other stocks worth considering in the food industry are Sanderson Farms Inc. (SAFM - Snapshot Report) and Pilgrim's Pride Corporation (PPC - Snapshot Report); each carrying a Zacks Rank #1 (Strong Buy). Also, Annie's, Inc. (BNNY - Snapshot Report) carries a Zacks Rank #2 (Buy).

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