Nov. 24 (Bloomberg) -- Hormel Foods Corp., the maker of Spam luncheon meat and Jennie-O turkey, said fiscal fourth- quarter profit rose 53 percent as meat costs declined.

Net income increased to $103.9 million, or 77 cents a share, in the three months ended Oct. 25, from $67.8 million, or 50 cents, a year earlier, Austin, Minnesota-based Hormel said today in a statement. Profit topped the 68-cent average estimate of nine analysts surveyed by Bloomberg.

Profit in the refrigerated-foods segment, the largest unit, increased 23 percent from a year earlier because of lower costs and improved sales of pepperoni, Lloyd’s barbecue products and DiLusso Deli items. Lower costs for hogs helped expand gross profit to 18.2 percent of sales, from 14.8 percent a year earlier.

“It was a very good quarter from a gross-margin standpoint, the best in at least 16 quarters,” Akshay Jagdale, a New York-based analyst at KeyBanc Capital Markets, said by telephone. “Clearly hog prices did help, though they didn’t realize as low a hog cost as you would think given where spot prices were.”

Hormel fell 64 cents, or 1.6 percent, to $38.25 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have increased 23 percent this year.

Profit in the year that started Oct. 26 will rise to $2.63 to $2.73 a share, bolstered by higher sales, Chief Executive Officer Jeffrey M. Ettinger said. The average estimate of nine analysts was for profit of $2.60.

‘Normal Earnings Growth’

“Having returned to more normal earnings-growth levels this year, we are confident in our ability to continue to enhance our bottom line,” Ettinger said in the statement.

Hormel will face higher meat prices by the second half of 2010, although the increase probably won’t be as large as futures indicate, Jagdale said. Hog futures have climbed 54 percent since hitting this year’s low of 43.05 cents a pound on the Chicago Mercantile Exchange on Aug. 18.

Rising meat prices may not narrow margins because Hormel is selling more value-added products such as deli meats and Hormel chili, Jagdale said.

“They have done a very good job of converting commodity meats into higher-value products,” he said.

Fourth-quarter revenue fell 10 percent to $1.68 billion, trailing the $1.81 billion average estimate of analysts in the survey.

The grocery products unit, which makes Hormel chili, increased earnings 12 percent, aided by lower ingredient costs.

The company also raised its annual dividend to 84 cents a share from 76 cents.

To contact the reporters on this story: Thomas Black in Monterrey at tblack@bloomberg.net; Jack Kaskey in New York at jkaskey@bloomberg.net.

Last Updated: November 24, 2009 16:26 EST