* First-quarter earnings/share $0.48, in line with estimates
* First-quarter revenue $2.12 bln vs est $2.14 bln
* Raises full-year EPS outlook by 3 cents to $1.93-$2.03
By Siddharth Cavale
Feb 21 Hormel Foods Corp, the maker of
Spam canned ham, raised its profit forecast for the year,
encouraged by a strong performance in its grocery division, but
said margins will be under pressure due to higher livestock feed
The grocery division, which makes Spam, Dinty Moore Beef
Stew and Hormel Chili, has products that do well in an
environment where consumers are value conscious, Morningstar
analyst Kenneth Perkins said.
Perkins said the addition of new products like cheesy pasta
also helped growth in the division, which contributed about 16
percent of the total sales in the quarter.
Sales in the grocery division rose 24 percent and volumes
jumped 20 percent during the quarter, outpacing the overall
revenue growth of 4 percent.
Shares of the company were up about 2 percent at $36.52 on
the New York Stock Exchange.
Hormel, which bought Unilever Plc's Skippy peanut
butter brand last month, raised its earnings forecast for the
year ending October by 3 cents to $1.93-$2.03 per share.
Analysts were expecting $1.96 per share on average,
according to Thomson Reuters I/B/E/S.
A drought in the U.S. Midwest last year led to higher grain
costs, making livestock feed more expensive and prompting many
meat companies to reduce the size of their herds.
Hormel had said last year it would reduce harvest levels in
its Jennie-O Turkey and pork business to counter the volatility.
"Higher grain costs and lower turkey commodity meat prices
will continue to hinder margins at Jennie-O Turkey Store in the
near term," Chief Executive Jeffrey Ettinger said on a
post-earnings conference call.
Operating margins in its turkey division, the second largest
contributor to the total sales, fell to 15.1 percent in the
quarter from 20.6 percent a year earlier.
Ettinger said he expects a steeper decline in the margins
for the business in the current quarter, but sees them climbing
back to first-quarter levels in the second-half of the year.
Analyst Perkins said margins in the division were better
than expected, but it was still too early to make predictions
for the full year.
Volumes fell 2 percent in its refrigerated foods business,
which produces pepperoni and sliced deli meats. Margins were
squeezed by higher pork processing costs.
Overall gross margins were not affected much as the company
said it was able to keep costs down.
First-quarter net income rose to $129.7 million, or 48 cents
per share, in the quarter ended Jan. 27, from $128.4 million, or
48 cents per share, a year earlier.
Revenue was $2.12 billion, just below the $2.14 billion
analysts were looking for.