June 19, 2013

Hormel sees lower 2013 earnings due to weak pork operations result

Buoyed by weak results in its pork operations and stifling expenses stemming from last summer's drought, HormelFoods (HRL) narrowed its fiscal 2013 earnings expectations.

The Austin, Minn.-based food and meat manufacturer now sees full-year earnings in the range of US$1.88 to US$1.96 a share, down from an earlier US$1.93 to US$2.03. Analysts on average are calling for 2013 EPS of US$1.99, according to a Thomson Reuters poll.

Meat producers have been struggling under the weight of rising feed costs for cattle, a reflection of limited corn and grain supplies following last summer's drought along the Corn Belt. That has forced beef producers to raise prices, in some cases to record highs.

"Lower than expected results in our pork operations, higher input costs and softer sales of our retail products in our Refrigerated Foods segment are the primary reason for the expected shortfall in our second half results," Hormel CEO Jeffrey Ettinger said in a statement.

While Hormel's shares have rallied 30% year-to-date, they fell close to 5% to US$38.70 in early trade as investors digested the warning.

The chicken producer nevertheless remains "very bullish" about its future earnings potential and says it will provide more details on the forecast at its annual investor day on June 26.