Foodmakers Weather Downturn, Shares Rise

Hormel and Smucker both reported stronger earnings despite a slow economy, and Heinz said profits would be at the high end of expectations. Earnings slipped at Campbell Soup, but it said it would do what other foodmakers already have pass along higher costs to customers. Shares of all four rose 4 percent or more on a day when the broader market was mixed.

"In tough economic times, the comfort, cost and convenience of a peanut butter and jelly sandwich gains even greater favor with our consumers," said Smucker Chairman and co-CEO Tim Smucker.

All foodmakers have been struggling with high fuel prices and rising costs for ingredients such as wheat and corn which in turn have driven up prices for animal feed. Many have passed along price increases to customers. Hormel's Jennie-O Turkey Store turkey has been especially vulnerable because Hormel owns some turkey farms meaning it is exposed directly to higher feed prices.

Hormel was the biggest surprise on Friday, helped by a recovery in Jennie-O results along with a strong showing from Spam. A slow economy boosted Spam sales, along with advertising, said Chairman and CEO Jeffrey M. Ettinger. Jennie-O's operating profit rose 16 percent to $34.8 million thanks to higher prices and manufacturing efficiencies. Hormel's refrigerated foods profit rose 50 percent to $62.8 million, helped by lower pork costs.

Overall, Hormel said its first-quarter profit rose 17 percent to $88.2 million, or 64 cents per share, from $75.3 million, or 54 cents per share, a year earlier. Sales rose 8 percent to $1.62 billion. The results were well ahead of the expectations of analysts surveyed by Thomson Financial: 58 cents per share on revenue of $1.59 billion.

"WOW" wrote D.A. Davidson & Co. analyst Timothy S. Ramey.

Austin, Minn.-based Hormel said feed prices alone would rise $120 million this year, although some of that was offset with hedging. As for the turbulent economic environment, Ettinger said some foodservice customers have shifted toward buying lower-priced items, but he has not seen a similar adjustment by retail customers.

Hormel says it still expects 2008 earnings of $2.30 to $2.40 per share. Wall Street expects $2.35 per share.

Jams and jellies maker J.M. Smucker Co. also overcame higher commodity prices, reporting a 5 percent increase in its third-quarter profit. Smucker earned $42.4 million, or 75 cents per share, compared with $40.4 million, or 71 cents per share, during the same period last year. Restructuring and merger costs reduced the total by 4 cents a share. That brought Smucker's results in a penny ahead of the expectation of analysts.