Hormel Foods Corp., maker of Spam and Dinty Moore meat products, reported a better-than-expected quarterly profit, helped by a big gain in its turkey unit, as it raised prices to offset higher raw material costs.
Hormel also increased its full-year earnings forecast on Tuesday, and its shares rose slightly in premarket trading, "Our Jennie-O Turkey Store segment had an outstanding quarter, driven by favorable commodity meat margins and improved efficiencies across the entire supply chain and operations," Chief Executive Jeffrey Ettinger said in a prepared statement.
Jennie-O's profit rose 122 percent.
Hormel, like other meat companies, has had to pay higher prices for beef and pork because of smaller cattle and hog herds and strong meat exports.
In addition, high corn prices, the result of more corn going to exports and to make ethanol, increased production costs for the nation's poultry producers.
"We expect to see higher input costs the balance of the year, and our team will continue to tackle the challenge of offsetting these added costs with pricing and efficiency gains," said Ettinger.
Net income in the fiscal first quarter ended Jan. 30 was $148.8 million, or 55 cents per share, up from $111.2 million, or 41 cents per share, a year earlier.
Sales rose 11 percent to $1.92 billion.
Analysts, on average, were expecting 43 cents a share on revenue of $1.86 billion, according to Thomson Reuters I/B/E/S.
Hormel raised its full-year earnings forecast to a range of $1.62 to $1.68 a share, up from its earlier view of $1.55-$1.60.
Shares of the company, which gained some customers in the recession as more people ate at home and looked for low-priced options, have risen 5 percent this year, compared with a 3.5 percent rise in the Dow Jones U.S. Food Product Makers Index .DJUSFP, of which Hormel is a component.