Hormel's EPS In Line, Revs Beat

Hormel Foods Corporation (HRL - Analyst Report) 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.

Outlook

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 336^th 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 - Analyst Report), Kraft Foods Inc. (KFT) 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.