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Hormel Foods Corp. (HRL - Analyst Report) is set to report its third-quarter 2012 results on Thursday, May 23, 2012.

The current Zacks Consensus Estimate is pegged at 41 cents, representing an annualized growth of 12.5%.  

With respect to earnings surprises, HRL has outperformed the Zacks Consensus Estimate in three of the last four quarters and was in line in the other.  Average earnings surprise stood at 7.44%, implying that the company has surpassed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Second Quarter 2012 Highlights

On May 23, Hormel Foods Corporation posted second-quarter 2012 financial results with earnings per share of 48 cents, surpassing the Zacks Consensus Estimate of 42 cents. The quarter’s earnings also spiked 20% from 40 cents earnings per share in the prior-year period.

Net earnings came in at $127.9 million compared with $109.6 million in the second quarter of 2011.

Net sales for the second quarter of 2012 were $2,012.9 million, up 2.7% year over year but slightly lower than the Zacks Consensus Estimate of $2,035 million. The year-over-year increase was driven by the sales gain across four of the company’s five segments. Export sales across international business also contributed to growth.

Agreement of Estimate Revisions   

In the last 30 days, none of the analysts increased or decreased the company’s earnings per share estimates for the third quarter of 2012, given the lack of catalysts. Also, for 2012, none of the analysts increased or decreased their estimate, and followed a similar trend for 2013.

Magnitude of Estimate Revisions   

Estimates over the last 30 days increased slightly from 40 cents to 41 cents per share for the third quarter of 2012.

Estimate for 2012 remained static at $1.85 over the last 30 days while that for 2013 showed a similar trend and stood at $1.95. These estimates represented a year-over-year growth of 6.45% and 5.48% for 2012 and 2013, respectively.

Our Take   

We expect positive sales momentum and rise in EPS for the third quarter of 2012. Weare optimistic on the company’s continuously improving operational efficiencies and pricing strategy, which has been positioning Hormel above its peers.

The company faces stiff competition from ConAgra Foods Inc. (CAG - Analyst Report), Kraft Foods Inc. , and Tyson Foods Inc. (TSN - Analyst Report).

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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