Hormel Foods profits exceed expectations

Hormel Foods Corp posted a better-than-expected quarterly profit on Wednesday (May 19) as sales improved, also raising its earnings forecast for the year despite higher hog costs.

Most of the raised forecast stems from the stronger-than-expected second-quarter profit. Hormel's shares slipped 2.5% to US$40.75 in pre-market trade.

The company, which also owns the Jennie-O turkey brand, earned US$77.9 million, or 57 cents a share, in the fiscal second quarter ended April 25, down from US$80.4 million, or 59 cents a share, a year earlier.

Excluding charges related to a plant closure and the tax impact of new healthcare laws, adjusted earnings per share rose 14% to 67 cents per share, topping analysts' average forecast of 61 cents, according to reports.

Sales rose 7% to US$1.7 billion, topping analysts' average forecast of US$1.62 billion. Sales rose in each of the company's five units and were helped by items like Hormel chili as consumers ate more meals at home to curb spending. The volume of food sold rose 2%.

Adjusted operating profit fell 2% in the grocery products segment due to higher protein costs. Hormel said it expects higher hog costs to persist during the remainder of the year.

In late March, the USDA reported the US hog herd as of March 1 was down 3% from a year earlier, while analysts had expected a 2% decline. That report also showed there would be 4% fewer hogs this summer.

Hormel now expects adjusted earnings of US$2.75 to US$2.85 per share this year, up from a prior forecast of US$2.68 to US$2.78. Analysts have been calling for US$2.75 per share.