* Q2 profit 59 cents/shr; average Street forecast 50 cents
* Sees full-year earnings near top of previous forecast
* Shares up 2.1 percent
(Adds company and analyst comment; updates share price)
By Bob Burgdorfer
CHICAGO, May 21 Hormel Foods Corp (HRL.N),
maker of Spam and other meat products, reported
better-than-expected quarterly profit on Thursday as consumers
saved money by eating more meals at home.
The company also said full-year earnings would be near the
top of its previous forecast of $2.15 to $2.25 per share.
"Prices are still high, costs are down, so overall
performance has been pretty good," said Frost & Sullivan
analyst Christopher Shanahan.
Food companies raised prices last year when costs for feed
grains and other input items sped higher. Now many of these
costs, particularly for feed grains, have moved back down,
which has helped companies like Hormel, Shanahan said.
Sales of Hormel's signature Spam and Dinty Moore brands
remained strong as shoppers sought value amid the weak economy.
In addition, sales improved for some convenience items such
microwaveable meals, the company said.
In an interview, Chief Executive Jeffrey Ettinger said he
expected a strong grocery business through the fiscal year,
which ends in October, while foodservice should remain weak.
For the second quarter ended April 26, earnings rose to
$80.4 million, or 59 cents per share, from $77.6 million, or 56
cents per share, a year earlier.
The average Wall Street forecast was 50 cents a share,
according to Reuters Estimates.
Revenue was little changed at $1.6 billion.
"As a result of our better-than-expected first half, we now
anticipate full-year results in the upper end of our previously
announced guidance range of $2.15 to $2.25 per share," Ettinger
said in a statement.
Analysts on average had been expecting $2.25 a share.
COST PRESSURES LINGER
Hormel raises the turkeys for its Jennie-O Turkey Store
brand, while it buys the hogs for its meat businesses.
Operating profit at Jennie-O rose 42 percent in the quarter
due to lower feed costs as the company reduced turkey
The company said the hogs that it buys currently cost more
than what some of the fresh pork is selling for.
"They still have a lot of headwinds, due to hog prices and
the consumer environment," said Morningstar analyst Ann
Swine flu also hurt. Ettinger told analysts on a conference
call that domestic pork sales had dropped about 10 percent when
the flu first started spreading. However, much of that drop has
The flu spread this spring from Mexico to the United States
and prompted some countries to ban imports of U.S. pork, even
though the virus is spread by humans, not by pigs.
Hormel shares were up 68 cents, or 2.1 percent, at $33.63
in afternoon New York Stock Exchange trading.
(Reporting by Bob Burgdorfer; Editing by Lisa Von Ahn)