CAG ConAgra Brands Inc

On November 22, Hormel Foods Corporation (HRL) posted financial results for the fourth quarter and fiscal 2011 with an EPS of 43 cents, down 4% compared with 45 cents in the prior-year period. The recorded EPS marginally surpassed the Zacks Consensus Estimate by a penny.

For FY11, diluted net earnings per share were recorded at $1.74, up 15% from diluted adjusted net earnings per share of $1.51 and 19% from U.S. GAAP diluted earnings per share of $1.46 recorded in FY10.

Net earnings attributable to the company reached $117.3 million, down 3% from $121.1 million in the fourth quarter of 2010. For the year ended October 30, 2011, net earnings were recorded at $474.2 million, up 16% from adjusted net earnings of $409.0 million and up 20% from U.S. GAAP net earnings of $395.6 million a year ago.

Net sales for the fourth quarter of 2011 were $2,104 million, up 2% y/y, slightly missing the Zacks Consensus Estimate of $2,109 million. The increase was driven by net sales increase across four of its five segments backed by strategic pricing actions. Advertising campaigns and acquisitions also provided impetus to the company’s sales activities during the quarter.

During the fourth quarter of 2011, revenue from Grocery Products inched down 1.8% year over year while Jennie-O Turkey Store witnessed a stronger revenue improvement of 1.7%. The Refrigerated Foods segment ended the quarter with an increase of 0.8% in revenue year over year while Specialty Foods registered a rise of 9.5%. Revenue from all other items surged 12.4% during the reported quarter.

Sales for the year ended October 30, 2011, totaled $7,895.1 million, up 9.3% y/y.

Operating profit for Grocery Products and Jennie-O Turkey Store for the fourth quarter 2011, increased 3.2% and 4.2% y/y based on revenue improvement from Mega Mix joint venture, increased value-added sales and enhanced efficiencies. However, operating profit for Refrigerated Foods reduced 19.3% while that of Specialty Foods rose 12.2% year over year.

The gross profit for the fourth quarter of 2011 was recorded at $336 million, down from $355 million reported in the year-ago comparable quarter. For FY11, gross profit was recorded at $ 1,334.1 million, up from $1,238.7 million recorded a year ago.

Selling, general and administrative (SG&A) expenses were down by 5.9% year over year, reaching $156.7 million in the reported quarter. For FY11, SG&A was recorded at $618.6 million, up compared with $605.3 million, a year earlier.

Exiting fiscal 2011, (period ended October 30, 2011) net cash provided by operating activities was recorded at $490.5 million compared with $485.5 million in the year-ago comparable quarter. At the end of fiscal 2011, the company recorded cash and cash equivalents of $463.1 million, slightly down from $467.8 million at the end of the previous fiscal. The long-term debt (less current maturities) stood at $250 million at the end of the fiscal 2011.

Outlook: Hormel has set its full-year EPS guidance for fiscal 2012 and estimates it in the range of $1.79 to $1.89 per share, expecting to deliver higher sales and earnings growth.

The board of directors of Hormel Foods Corporation recently announced its 46^th consecutive annual dividend increase on the company’s common stock. The annual dividend was raised to $.60 per share from $.51 per share.

A quarterly dividend of 15 cents on the company’s common stock was also authorized by the board of directors. The quarterly dividend will be paid on February 15, 2012, to stockholders of record at the close of business as of January 23, 2012.

Based in Austin, Minnesota, Hormel Foods Corporation is a leading manufacturer and marketer of various meat and food products in the United States and internationally. The company faces stiff competition from ConAgra Foods Inc. (CAG), Kraft Foods Inc. (KFT) and Tyson Foods Inc. (TSN).

We currently maintain a long-term Neutral recommendation on the stock. Hormel has a Zacks #3 Rank, which translates into a short-term Hold rating (1-3 months).

 
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