Hillshire gives cautious outlook on higher costs

Hillshire Brands Co forecast earnings for its new fiscal year below Wall Street estimates as the newly independent meat company faces higher commodity costs and intense competition.

Hillshire uses a range of meats, including pork, turkey and beef to make its Hillshire Farm lunch meat, Jimmy Dean sausages and Ball Park hot dogs. It faces higher prices for sows.

But the company's ability to raise its prices to fully offset the inflation may be limited by aggressive discounting from competitors, particularly in corn dogs and lunch meat, it said on Thursday.

Adjusted earnings per share for fiscal 2014 should be flat to down in the mid-single-digits in percentage terms from the $1.72 per share Hillshire earned in fiscal 2013, ended June 29. Analysts, on average, expected 2014 earnings of $1.78 per share.

The company, formerly known as Sara Lee, spun off its international coffee and tea business in June 2012 into D.E Master Blenders 1753 NV and changed its name to Hillshire Brands.

It considered fiscal 2013 as a transitional year as it strengthened its advertising and new products.

In the fourth quarter, operating income fell 23 percent due to a 2 percent decline in sales and planned investments in marketing and new items.

Excluding one-time items, earnings were 26 cents per share, topping the analysts' average estimate by a penny, according to Thomson Reuters I/B/E/S.

Net income fell to $41 million, or 33 cents per share, from $599 million, or $5.02 per share, a year earlier.

Net sales were off 2 percent to $962 million, below analysts' expectations of $979.7 million.

The company raised its quarterly dividend to 17.5 cents per share from 12.5 cents, and said it plans to buy back about $200 million worth of stock over the next two fiscal years.

Hillshire shares were down 0.1 percent at $33.80 on the New York Stock Exchange.

(Reporting by Martinne Geller in New York; Editing by Gerald E. McCormick, John Wallace and Jeffrey Benkoe)