Hormel Foods Corporation (HRL) posted strong results for the second quarter of fiscal 2010 with an EPS of 67 cents, up from 59 cents in the year-ago quarter. Reported EPS surpassed the Zacks Consensus Estimate by 6 cents.
Net income stretched 13.6% year over year to $91.3 million from $80.4 million in the second quarter of 2009. The increase was driven by bloated revenues together with cost maintenance.
During the quarter, net revenues were $1,669.8 million, 6.6% up from $1,595.0 million in the corresponding period of the previous year. This was attributable to increased revenue in all segments.
Revenue from Grocery Products and Refrigerated Foods topped by 6.2% and 7.1% respectively. Revenue from Jennie-O Turkey Store bloated only 1% while Specialty Foods grew 13.5% year over year. Higher demand for food products based on an improved economy is one strong reason for the growth.
Selling, general and administrative expense as a percentage of revenue remained almost flat with a decrease of just 20 basis points.
Capital expenditures grew by $2 million from $20 million in the second quarter of 2009. For 2010, management anticipates capital expenditures in the range of $105-$115 million.
Based on better-than-expected results in the second quarter, Hormel raised its full-year EPS guidance by 7 cents from a range of $2.68 to $2.78 to $2.75 to $2.85.
Hormel Foods is a leading manufacturer and marketer of various meat and food products. The company has strengthened its position through acquisitions, which is expected to be its key growth strategy in the future.
Further the company plans to increase spending on advertising, which would definitely help maintain and grow its market share in the future. Moreover, a greater share of value-added branded products in Hormel’s product-mix will help strengthen its margins and reduce exposure to commodity prices in the long term. Thus, we maintain our Neutral recommendation on the stock.
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