Earnings Preview: Hormel Foods Corp.

AP News
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Posted: Nov 20, 2009 2:19 PM

Hormel Foods Corp. reports results for its fiscal fourth quarter on Tuesday before the market opens. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Hormel, based in Austin, Minn., continues to see gains as its foods like Spam, Dinty Moore stews and Chi-Chi's Mexican products resonate with budget-conscious shoppers.

Consumers continue to limit their spending and eat at home in response to the recession, and that benefits food makers like Hormel. Sales of meat-in-a-can product Spam as the company comes out with new iterations, such as singles packs.

Hormel also benefited as its costs for doing business _ such as the cost of raising hogs _ has fallen. The meat industry had been hurting since at least the summer of 2008 costs for items like corn rose to record highs and a slump in demand _ brought on by a drop in restaurant visits by consumers _ made it difficult for meat producers to raise their prices.

Hormel makes both pork and turkey. The entire meat industry has been shedding production to help bolster pricing, and those moves are taking effect.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect earnings of 67 cents per share excluding one-time items on revenue of $1.82 billion for the quarter. Hormel earned 50 cents per share last year in the same period on revenue of $1.82 billion.

ANALYST TAKE: KeyBanc Capital Markets analyst Akshay Jagdale recently raised his estimates for fourth-quarter profit to 76 cents per share, from 72 cents, as hog costs fell for Hormel. He said those costs are among the lowest Hormel has seen in at least eight years.

WHAT'S AHEAD: It's unclear how long low costs for hogs will last. The company is also trying to push its higher-priced products, including its Jennie-O Turkey Store brand to woo shoppers away from less expensive, store brands; it launched marketing for that brand in the quarter to push sales.

STOCK PERFORMANCE: Hormel's shares rose about 1 percent in the quarter to finish at $36.46. Shares closed Thursday at $38.37, almost hitting the top of their 52-week range from $24.81 to $39.04.