Hormel Foods Corp., which so far this year had been able to weather rising commodity prices with strong earnings increases, backtracked Friday as it warned that third-quarter and full-year earnings would fall short of targets.
The Austin, Minn.-based meat and food manufacturer blamed rising feed and fuel costs in its Jennie-O Turkey Store division for the shortfall. While corn, which hit record highs of nearly $8 a bushel in late June, has fallen dramatically in recent weeks -- to $5.18 on Friday -- prices are still significantly higher than a year ago.
Hormel stock fell more than 5 percent on the news, closing at $35.64.
Earnings for the quarter are expected to be between 37 and 39 cents per share, Hormel said. Analysts had been expecting 45 cents. A year ago, the company earned 41 cents per share.
While feed and fuel costs have been rising all year, in previous quarters Hormel was able to offset that with price increases and higher sales of products such as Spam.
Lower pork costs also helped shore up profit.
But in a brief statement Friday, the company said price increases in the Jennie-O segment haven't offset higher costs, and that an oversupply of turkey breast meat exacerbated the problem, keeping prices down.
Earnings pressure will continue in the fourth quarter, as the birds that were fed with higher-priced grain make their way through the system, Hormel CEO Jeffrey Ettinger said in the statement.
The company, which still expects earnings to rise for the year, lowered its full-year forecast to between $2.22 and $2.28 per share, down from $2.30 to $2.40.
Executives were unavailable for comment Friday. The company releases full third-quarter results Aug. 21.
Karen Lundegaard • 612-673-4151