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Meat and food products company, Hormel Foods Corporation (HRL - Analyst Report), posted earnings per share of 57 cents in the first quarter of fiscal 2014 (ended Jan 26, 2014), up 18.8% from the year-ago quarter. The rise in earnings was led by improved revenues and margins. The bottom-line result was in line with the Zacks Consensus Estimate.

Sales: Hormel’s net sales for the reported quarter were $2,242.7 million, up 6.0% year over year. However, revenues missed the Zacks Consensus Estimate of $2,263.0 million. The year-over-year increase was mainly driven by improvement in all the segments except the Specialty Foods segment, as well as the contribution from the acquisition of Skippy peanut butter line. Total volume was up 2.0% year over year.

Segment Revenues: During the reported quarter, revenues from the Grocery Products segment rose 20.2% year over year to $401.5 million, and that for Jennie-O Turkey Store segment increased 2.3% to $399.4 million. The Refrigerated Foods segment’s revenues increased 6.1% year over year to $1,128.4 million. Similarly, revenues from the International & Other segment climbed 24.2% to $117.4 million. However, revenues from the Specialty Foods segment dropped 16.2% to $196.0 million.

Income/Costs: Hormel’s gross profit for the first quarter of fiscal 2014 was $398.6 million, up 15.8% from $344.2 million in the comparable quarter last year. Operating profit margin in the quarter expanded roughly 121 basis points year over year to 10.6%.

In the reported quarter, operating profits from the Grocery Products segment increased 12.9%, while the Refrigerated Foods segment registered a rise of 58.6% year over year. Operating profits for the Specialty Foods segment reduced 10.5% in the quarter, year over year. Operating profit for the Jennie-O Turkey Store segment improved 1.0% and the International & Other segment’s profit jumped 31.8% year over year.

Balance Sheet: At the end of the reported quarter, the company recorded cash and cash equivalents of $639.8 million, up from $434.0 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 with the earlier quarter.

The company paid a quarterly dividend of 20 cents on Feb 14, 2014, representing the 342nd straight dividend payout.

Outlook: Refrigerated Foods segment is expected to continue growing in the quarters ahead. The company also hopes to attain greater success with its products including Hormel Rev snack wraps and Hormel Fire Braised meats.

Higher fuel costs and exceptionally cold weather are likely to increase cost of goods sold in the Jennie-O Turkey Store segment. Also, pork raw materials supply can be restrained. In view of the same, management maintained 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 Tyson Foods, Inc. (TSN - Analyst Report), The Hillshire Brands Company and The Hain Celestial Group, Inc. (HAIN - Analyst Report). While Tyson Foods sports a Zacks Rank #1 (Strong Buy), The Hillshire Brands and Hain Celestial Group have a Zacks Rank #2 (Buy).

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