Hormel Foods (HRL) released its 2nd quarter 2015 results this morning. The company reported earnings-per-share of $0.67 per share for the quarter. Earnings-per-share rose 29% from $0.52 per share in the same quarter a year ago. The market has responded favorably, pushing the company’s share price up over 4% at the time of this writing.
Hormel’s Growth Explored
Hormel is not a new company and has no business growing earnings-per-share 29%. Hormel is a Dividend Aristocrat. The company was founded in 1891.
Revenue growth was not the driver of rapid earnings-per-share growth. The company’s sales growth by segment versus the same quarter a year ago is shown below:
The rapid growth in the Specialty Foods segment is due to the company’s acquisition of CytoSport – makers of MuscleMilk. The Jennie-O Turkey segment did show excellent sales growth, but the Refrigerated Foods segment and International & Other segments showed declining sales. In total, Hormel realized sales growth of 2% versus the same quarter a year ago. This is not the type of sales growth that normally accompanies a 29% jump in earnings-per-share.
Compare the company’s sales growth by segment with profit growth by segment (shown below):
Every segment posted increased profit. The Refrigerated Foods and Jennie-O Turkey segment showed rapid growth. These two segments were responsible for the 29% jump in earnings-per-share.
Refrigerated Foods
According to Hormel’s 2nd quarter 2015 press release, results in the Refrigerated Foods segment “were driven by lower input costs along with strong sales growth of value added items (emphasis added)”.
