A Refreshing Slice From Hormel

What's not to like about Hormel (NYSE: HRL)? I mean, while I didn't notice a run on Spam when I was shopping for Super Bowl snacks, the Minnesota-based maker of meat and other food products is showing it knows how to bring home the bacon.

First-quarter results tell the tale. Sales were up 8% on a volume increase of 5%. The company reported sales increases in all categories, with grocery products (think Spam and Dinty Moore beef stew) leading the way, up 10%. This increase is right in line with company sales trends last year.

But what got my juices flowing was a 25% jump in operating profit, leading to earnings per share of $0.64 -- up 18.5% compared with last year and well above the $0.58 expected by the Street.

Two key earnings drivers were that margins grew by 90 basis points and expenses were up only 5%. While the company experienced higher grain costs in its turkey business, these were more than overcome by favorable pork prices. This diversification allowed Hormel to overcome cost pressures that have taken a major bite out of profits at other companies like Kraft (NYSE: KFT) and Kellogg (NYSE: K).

No word yet on the false advertising suit Hormel filed last fall against Campbell Soup (NYSE: CPB). This spat, over whether one of Campbell's new soup lines actually contains enough beef to meet the government definition of stew, hasn't had much play in recent months. Perhaps the two companies are letting the issue simmer for a while.

This is the second quarter in a row that Hormel has delivered a pleasant surprise to analysts. No wonder the Motley Fool CAPS community is taking a more favorable view of the stock, awarding it four stars (out of a possible five), well ahead of competitors ConAgra Foods (NYSE: CAG) and Tyson Foods (NYSE: TSN).

With solid growth and a dividend of nearly 2%, perhaps it's time you look at Hormel.

For related Foolishness:

• Kellogg has resolved to serve up a healthier bowl.
• And while Campbell may be losing its flavor,
• Chicken is going cha-ching for Tyson.