Packaged food and meat products maker Hormel Foods Corp. (HRL) reported Thursday a profit for the second quarter that decreased two percent from last year, reflecting increased corporate expenses amid higher employee costs. Both earning per share and quarterly revenues missed analysts' expectations. However, the company maintained its earnings guidance for the full-year 2013.
"We were pleased to deliver sales and volume growth, despite harvest reductions in both our Refrigerated Foods and Jennie-O Turkey Store operations. In terms of operating profits, improved results by our Specialty Foods, Grocery Products, and International & Other segments did not fully offset weaker results by our Jennie-O Turkey Store segment," Chairman, President and CEO Jeffrey Ettinger said.
The Austin, Minnesota-based company posted net earnings of $125.52 million or $0.46 per share for the second quarter, lower than $127.89 million or $0.48 per share in the prior-year quarter.
On average, eight analysts polled by Thomson Reuters expected the company to report earnings of $0.49 per share for the quarter. Analysts' estimate typically excludes one-time items.
Net sales for the quarter increased 6.9 percent to $2.15 billion from $2.01 billion in the same quarter last year, but missed eight Wall Street analysts' consensus estimate of $2.19 billion. Sales volumes for the quarter increased 4 percent from last year.
Hormel Foods' largest segment, refrigerated foods, recorded a 2 percent decline in sales to $1.01 billion or 47 percent of net sales, from the prior-year quarter. Meanwhile, operating profit grew 3.2 percent, while volumes declined 4 percent from last year.
Sales for the Jennie-O Turkey store totaled $384.74 million or 18 percent of net sales, a 2.6 percent decline from the same quarter last year. Operating profit at the segment dropped 25.9 percent, while sales volumes decreased 4 percent.
Grocery products sales surged 49.1 percent to $393.51 million or 18 percent of net sales, from the year-ago quarter. Segments' operating profit rose 10.4 percent, and volume was up 47 percent.
Grocery products sales were increased only 4 percent and volume was up only 3 percent excluding sales of Don Miguel products and Skippy peanut butter.
Sales for specialty foods totaled $245.69 million or 11 percent of net sales, up 7.3 percent from the prior-year quarter. Operating profit also increased 24.5 percent, with a volume decline of 4 percent.
All other segment, including the international business unit, contributed sales of $117.38 million or 6 percent of net sales, 21.1 percent higher than the year-ago quarter. Operating profit was also up 21.5 percent, and sales volumes were up 11 percent. Sales were up 4 percent and volume was down 2 percent, excluding sales of Skippy peanut butter.
Total segment operating profit decreased 2.1 percent to $195.56 million from the year-ago quarter. Meanwhile, general corporate expense increased, primarily related to higher employee costs.
The company noted that the integration of the domestic Skippy peanut butter business into the Grocery Products segment was completed during the quarter, ahead of schedule. The closing of the acquisition of the China business is on track to be completed by the end of the fiscal year.
Looking ahead to fiscal 2013, Hormel Foods maintained its earnings guidance in a range of $1.93 to $2.03 per share. Street is currently looking for full-year 2013 earnings of $2.00 per share.
"Our Refrigerated Foods segment is presently facing weaker pork operating margins and challenges in live hog production operations, though we expect those factors to improve in the back half of the year. We expect results in our Jennie-O Turkey Store segment will turn the corner as pressures from higher commodity grain prices and weaker turkey commodity meat prices begin to moderate in the back half of the year," Ettinger added.
HRL closed Wednesday's regular trading session at $42.40, down $0.19 on a volume of 0.86 million shares. In the past 52-week period, the stock has been trading in a range of $27.28 to $43.17.
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