Hormel 4Q Profit Up 12 Percent

Hormel Foods Corp. earnings rose 12 percent in its fiscal fourth quarter as profit rebounded in its Jennie-O Turkey Store brand. The company also raised its dividend 23 percent to bring it to a yield of about 2 percent, more in line with other packaged food makers. Previously its dividend yielded 1.7 percent.

Hormel shares rose $1.09, or 3.1 percent, to $36.84 Tuesday.

Rising grain and fuel prices have made it more expensive to raise animals such as pigs and turkeys, pressuring Hormel and other foodmakers. Hormel responded by raising Jennie-O Turkey store prices an average of 3 percent to 4 percent, said Chairman, President and Chief Executive Jeffrey M. Ettinger.

Operating profit for turkey products rose 15 percent, faster than 6.6 percent revenue growth, to $336.9 million.

"They were a key contributor to our strong fourth quarter," Ettinger said in an interview.

Ettinger said grain prices have leveled off in recent months, but he doesn't expect them to return to their old levels anytime soon.

"We really have built our business plan and our pricing structure around this being the new reality, at least for the time being," he said.

Fuel prices are still rising and Hormel may lift prices further to offset that, Ettinger said.

The profit "provides evidence that Hormel's pricing has effectively caught up with higher input costs within the volatile Jennie-O Turkey Store segment," Stifel Nicolaus analyst Oliver Wood wrote in a research note. He added that Hormel should benefit next year from an oversupply of live hogs, depressing hog prices.

Austin-based Hormel earned $101.2 million, or 73 cents per share, during the quarter that ended Oct. 28. That's up from $90 million, or 64 cents per share, during the same period a year ago. Revenue rose to $1.66 billion, from $1.56 billion a year ago.

Selling a corporate plane -- which was replaced by another -- and disposing of Indian food joint venture Patak added 3 cents per share to profit. Without those, Hormel would have earned 70 cents per share. On that basis, analysts surveyed by Thomson Financial were expecting a profit of 65 cents per share on revenue of $1.67 billion.

The company said it expects to earn $2.30 to $2.40 per share during fiscal 2008. Analysts were expecting $2.32. Hormel said it would no longer issue quarterly guidance.

Operating profit rose 15 percent in Hormel's largest segment, refrigerated foods, which made up more than half of the company's sales for the quarter. Revenue increased to $850.6 million from $787.6 million a year ago.

For the full year, Hormel earned $301.9 million, or $2.17 per share, up from $286.1 million, or $2.05 per share, a year ago. Revenue rose to $6.19 billion, up almost 8 percent from $5.75 billion a year ago.

Joshua Freed can be reached at jfreed(at)ap.org