Hillshire Brands Company
(
HSH
), formerly Sara Lee Corporation, reported adjusted earnings of
51 cents per diluted share in the first quarter of 2013,
comprehensively beating the Zacks Consensus Estimate of 32 cents
by 59.4%. Earnings also grew by 19 cents from the prior-year
quarter's earnings attributable to strong top-line growth.
Hillshire Brands Company came into existence in June 2012, after
Sara Lee Corporation spinned off its international coffee and tea
business into a separate publicly traded company. After the spin
off, Sara Lee Corporation changed its name to Hillshire Brands
Company.
Revenue & Margin
Adjusted net sales grew 2.0% from the prior-year quarter to $1.01
billion in the first quarter of 2013 on the back of 3.2% volume
growth and the strong performance of the retail segment. The
company results were in line with the Zacks Consensus Estimate.
Consolidated adjusted operating income grew 76.3% to $105 million
in the first quarter of 2013, driven by strong top-line growth
and lower expenses. Operating margin grew 440 basis points to
10.4%.
Segment Discussion
Hillshire's
Retail
segment net sales of $719 million grew 3.0% from the prior-year
quarter, driven by volume growth of 2.3%. The brand building
strategy of the company resulted in strong performance of the
processed food products under the brands Jimmy Dean, Ball Park
and Aidells. The segment's operating income of $84 million grew
45.5%, driven by declining commodity costs and cost control
initiatives undertaken by the company.
Hillshire's
Foodservice/Other
segment net sales of $255 million declined 1.6% from the
prior-year quarter, due to declining demand for dessert,
unfavorable sales mix and low pricing. Volume grew 5.3% in the
quarter. The segment's adjusted operating income of $25 million
grew 10.9%, on account of lower expenses.
Hillshire's
Australian Bakery
segment net sales of $37 million declined 2.3% from the
prior-year quarter, due to 1.4% volume decline, closing of stores
and unprofitable private label operations. Excluding unfavorable
currency translations, net sales declined 1.1% from the
prior-year quarter. The segment's adjusted operating income of $4
million grew 70.8%, driven by lower expenses.
Other Update
Hillshire Brand's reported cash and cash equivalents of $253
million as of September 29, 2012 compared with $235 million as of
June 30, 2012.
On October 25, 2012, Hillshire Brand's declared a quarterly cash
dividend of $0.125 per share, which will be paid on December 31,
2012 to stockholders of record as of December 3, 2012.
We currently have a Neutral recommendation on Hillshire Brands
Company, a peer of
Smithfield Foods, Inc.
(
SFD
). The stock carries a Zacks #3 Rank (short-term 'Hold' rating).
We are encouraged by the company's strong performance in the
first quarter of 2013. However, we prefer to stay on the
sidelines, as we need some time to understand the full impact of
the spin off.
HILLSHIRE BRAND (HSH): Free Stock Analysis
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SMITHFIELD FOOD (SFD): Free Stock Analysis
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