Adam Harringa, Austin Daily Herald, Minn. –
Despite a major drought and high grain prices this summer, Hormel Foods Corp. reported a huge increase in third quarter earnings.
Hormel claimed Thursday morning $11.2 million in third quarter net earnings, or 41 cents per share, a 13 percent jump from $98.5 million, or 36 cents per share, in the third quarter of 2011. Even more impressive, Hormel has more than doubled its third quarter earnings in four years, as it reported $51.9 million in earnings in 2008 and has increased every year since.
The company attributes the increase this quarter to strong sales of Spam and MegaMex Foods, in its grocery products division, and its Jennie-O division. The grocery division, which accounts for 15 percent of net sales, saw a 21 percent increase over the third quarter of 2011.
“We are pleased to report record earnings and sales for the third quarter,” said Hormel CEO and President Jeff Ettinger in a press conference Thursday morning.
Sales for Jennie-O were up 7 percent, which more than off-set higher grain prices due to drought conditions, Ettinger said. The company expects margins for Jennie-O, which makes up 18 percent of net sales, to be higher in the fourth quarter because of higher grain costs. With higher grain and commodity meat costs, Ettinger said, one of the strategies for the Jennie-O division will be “to do the best they can to balance off the significant costs on the grain side.”
The meat producer’s revenue came in just above Wall Street expectations, and met the expectations of analysts surveyed by FactSet.
Revenue for the period ended July 29 increased 5 percent to $2.01 billion from $1.91 billion. This was slightly higher than the $2 billion that Wall Street forecast.
Revenue improved across all segments except refrigerated foods, which posted a slight decline. However, that division accounts for 52 percent of net sales.
Specialty foods, 11 percent of sales, grew by 11 percent, and the “all other” segment, which is primarily international sales, increased by 55 percent. That segment is 4 percent of net sales.
Hormel reported an increase for the second-straight quarter after two quarters of decline. For the nine months of this fiscal year, Hormel has net earnings of $367.4 million, up 3 percent from $356.9 million at this point last year.
The Austin company said Thursday that it still expects full-year earnings of $1.79 to $1.89 per share.
Analysts foresee earnings of $1.85 per share.
–Reporter Trey Mewes and the Associated Press contributed to this report.