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Hormel's EPS in Line, Revenue Lags

CAG TSN HRL

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Hormel Foods Corporation (HRL - Analyst Report) posted earnings per share of 49 cents in the fiscal fourth quarter of 2012 (ended October 28, 2012), in line with the Zacks Consensus Estimate. The quarter’s earnings also increased 14% from 43 cents per share reported in the prior-year period.

Fiscal 2012 earnings came in at $1.86 per share, in line with the Zacks Consensus Estimate. Earnings for the whole year also increased from 2011 earnings of $1.74 by 7%.

Sales

Net sales for the reported quarter were $2,170.2 million, up 3.2% year over year; but lagged behind the Zacks Consensus Estimate of $2,221.0 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 20.6% year over year and Jennie-O Turkey Store witnessed a revenue growth of 5.0%. However, the Refrigerated Foods segment registered a decline of 2.6% in revenue annually based on lower commodity meat prices. On the other hand, Specialty Foods revenue swelled 6.6% while revenue from all other items crept up 0.8% during the reported quarter.

Net sales for the whole year inched up 4.3% to $8,230.7 million, as compared to $7,895.1 million in 2011. For the whole year, the increase in net sales reflected an improvement in all the reportable segments of the company.

Income/Costs

Gross profit for the fourth quarter of 2012 was $351.8 million, up from $336.0 million in the comparable quarter last year. Selling, general and administrative (SG&A) expenses were up 1.9% year over year to $159.7 million in the quarter.

Operating profit for Grocery Products for the reported quarter increased 21.9% while Refrigerated Foods registered a decline of 21.9% year over year. Operating profit for Jennie-O Turkey Store jumped 5.4%, led by higher retail value-added sales. Specialty Foods profit surged 7.9% year over year.

Balance Sheet/Cash Flow

At the end of the reported quarter, the company recorded cash and cash equivalents of $682.4 million, up from $463.1 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.

During the quarter, net cash provided by operating activities was recorded at $233.7 million compared with $171.1 million in the year-ago quarter. Capital spending totaled $37.3 million as compared with $39.8 million in the year-ago quarter.

The company paid a dividend of 60 cents on November 15, 2012, representing 337th straight dividend payout by the company.

Outlook

Hormel anticipates earnings per share in fiscal 2013 to range within $1.90-$2.00 based on positive sales momentum across all the segments and value-added portfolio.

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) and Tyson Foods Inc. (TSN - Analyst Report). Hormel has a Zacks #2 Rank, which translates into a short-term (1-3 months) ‘Buy’ rating.

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