Hormel Foods Corp. posted strong quarterly results in its refrigerated meat businesses, but canned food lines like chili were weak, and the company fell short of Wall Street's profit expectations.
Hormel said Tuesday it earned $171.3 million, or 63 cents a share, for the fiscal fourth quarter ended Oct. 26, up 9 percent over the same time a year ago. Stock analysts polled by Thomson Reuters were on average expecting 64 cents a share.
Investors reacted by pushing the Austin, Minn.-based company's stock down 5 percent.
The company, maker of Cure 81 hams and Skippy peanut butter, recorded sales of $2.5 billion for the quarter, the last of fiscal 2014. That's up 9 percent from a year ago and in line with analysts' estimates.
"We are seeing a lot of momentum in many of our branded, value-added products, and particularly excellent numbers on the Jennie-O side," Jeffrey Ettinger, Hormel's chief executive, said in an interview with the Star Tribune.
Fourth-quarter sales of Jennie-O branded ground turkey and turkey bacon were notably strong.
For its new fiscal year, Hormel expects to exceed its stated goals of 5 percent sales growth and 10 percent earnings growth, Ettinger said.
But the company's profit guidance for the new year is $2.45 to $2.55 per share, short of the $2.59 per share consensus forecast of analysts polled by Bloomberg News. One stock analyst on Hormel's quarterly earnings call Tuesday said Hormel's forecast was "muted."
The company's stock closed at $51.32, down $2.80.
"Hormel is priced for perfection," said Brian Yarbrough, an analyst at Edward Jones. "It's still calling for good growth, but not as strong as people expected."
Hormel announced Tuesday it will build a third meat-processing plant in China, due to growing demand there. The plant, slated to open in 2016, will make the same sort of products as the other two: refrigerated meats like ham, bacon and pepperoni.
On the flip side, Hormel said it's planning to exit a hog raising and pork-processing joint venture in Vietnam. The project, which was launched about seven years ago, "just has not lived up to our expectations," Ettinger said.
Hormel also said Tuesday it will close a Stockton, Calif., plant that makes chili and Dinty Moore stew. Production there will be moved to plants in Beloit, Wis., and Atlanta.
Hormel's grocery division, home to chili, Spam and Compleats microwave meals, didn't fare well during the fourth quarter. Sales fell 3 percent and operating profit decreased 21 percent, dragged down by record-high raw meat material costs and soft demand for some products. The grocery business "definitely continues to struggle," Yarbrough said.
But Hormel's Jennie-O turkey division was a "standout," he said. Its sales were up 11 percent while operating profit was up 45 percent over a year ago.
Hormel's refrigerated-foods division, which includes fresh pork, saw a 9 percent increase in sales and a 10 percent increase in operating profits. That performance was anchored by strong profit margins in the pork business, and increases in retail sales of bacon, side dishes and Hormel's "party tray" appetizer assortments.
Hormel also announced Tuesday a dividend increase of 25 percent, or 20 cents per share, making the annual dividend $1 per share in 2015. It marks the 49th consecutive year that Hormel has raised its dividend.