Hormel Foods Corporation (HRL), the manufacturer of various food and meat products, reported second quarter results on May 21 that surprised on analysts’ estimates by 18% as SPAM sales surged.

Earnings per share for the quarter were 59 cents compared to 56 cents in the year ago period. Analysts expected only 50 cents. Sales were flat with the year ago period at $1.6 billion.

In the company’s Grocery Products segment, sales rose 4% due to strong sales of SPAM, Dinty Moore stews and Mexican products as consumers cooked more meals at home.

The Refrigerated Foods segment continued to struggle as sales were down 7% due to the spreads between hog costs and primal values.

However, the meat products business saw sales up double digits on the strength of Natural Choice lunch meats, Hormel party trays and Di Lusso Deli Company products. This was, again, a reflection of choices of consumers who are looking for value dining options.

Foodservice sales were soft in the quarter which reflected the overall economic conditions as consumers ate out less often.

2009 EPS Seen at High End of Forecast Range

Given the company’s strong first half of 2009, it is now forecasting EPS at the upper end of its prior guidance range of $2.15 to $2.25 per share.

2009 full-year consensus estimates are already at $2.25 but covering analysts have not yet updated estimates to include last week’s second-quarter results.

Value Fundamentals

Hormel Foods was a Zacks #1 Rank (strong buy) stock when I last reviewed it on Apr 29. It is now a Zacks #2 Rank (buy) stock. HRL has a forward P/E of 13.6. Its price-to-book is 2.21.

Hormel has now surprised on estimates 3 out of the last 4 quarters by an average of 13.27%. The company’s current dividend yield is 2.30%.

Zacks Investment Research
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