Having been identified with the unfortunate — and inaccurate — moniker "swine flu," news of the spread of the hybrid swine, avian and human influenza virus is pushing shares of protein companies lower. Meanwhile, analysts see several tough months ahead for several companies, notably Smithfield.

Shares of Smithfield, Tyson, Hormel and Sanderson Farms all opened sharply lower Monday morning, after news of the spread of the virus broke over the weekend. As of midday Monday:
• Smithfield was trading at about $9, down nearly 13 percent from its close on Friday.
• Hormel's price was about $30 per share, down about 2 percent from its Friday close.
• Tyson Foods was priced at about $10, down almost 9 percent from its Friday close.
• JBS, which operates three pork processing plants in the U.S., saw its stock drop as much as 9.9 percent at one point, then traded down 7.2 percent to 6.45 reais in late morning trade on the Brazilian Bovespa exchange.

Sanderson Farms, on the other hand, regained opening losses to trade around $40 by midday, up about 1.5 percent from its Friday close. Although there is no evidence that the virus can be spread by eating pork, analysts surmise that consumers may switch from pork to chicken anyway, which would benefit Sanderson Farms.

Lean hog futures also fell sharply on the Chicaco Mercantile Exchange.

Analysts' reports

A flurry of analysts' reports on the likely effect of the influenza that has killed over 100 people in Mexico on stock prices were issued Sunday night and Monday morning.

Kenneth B. Zaslow, of BMO Capital Markets, wrote that he expects an "emotional roller coaster for the protein stocks, particularly [Smithfield], for the next couple of weeks." Still, he said, he doesn't expect the news to change the company's earnings per share results, and he didn't lower the company's target price of $14.

JPMorgan's Ken Goldman was less forgiving, lowering his estimate for Smithfield's results "in part because of swine flu concerns," he wrote in a note to investors. A survey of supermarket meat departments indicated that consumers already are asking about a virus-pork connection, and "the fear generated by a disease named after hogs cannot be good for pork consumption."

Because of the swine flu outbreak, and other issues plaguing pork producers' margins, Goldman said he was lowering his project earnings per share for Smithfield's fiscal 2009 (ending April 30) to a loss of $1.68 per share from an estimated loss of $1.51 per share previously. Meanwhile, he lowered his estimates for Tyson Foods' earnings per share in its current fiscal year, ending April 30, to a loss of 23 cents per share, from a previous estimate of earnings of 22 cents per share.

'Blue skies'

Still, Goldman wrote that he expects two more tough quarters for Smithfield, then "blue skies."

Stephens Inc. equity analyst Farha Aslam didn't change her projections, but noted in her report that not only should consumption of pork be watched but also the effect on foodservice, as fear of the virus could depress restaurants' prospects even further.

And Heather Jones, an analyst with BB&T Capital Markets, affirmed her expectations for Smithfield's financial results, but noted that its stock price is the most vulnerable due to its vertical integration in the pork market.

Company statements

In their own responses to the news of the virus's spread, companies did not directly address the issue of their stock price.

Tyson said in a statement posted on its Web site that "our pork products are safe" and that in any case the company does not have pork processing operations or hog farms in Mexico. Still, the company said, "as recommended by the National Pork Producers Council, we are taking measures to tighten our existing biosecurity protocols to protect our hogs from this virus."

Smithfield's statement emphasized that the company "has found no clinical signs or symptoms of the presence of swine influenza in the company's swine herd or its employees at its joint ventures in Mexico." The company's Mexico operations are cooperating with authorities, the statement said, submitting samples for testing.

Hormel, JBS and Sanderson Farms had not made any public statements and executives at those companies could not be reached for comment..

For more stories, go to www.meatingplace.com.