Source:  LIsa M. Keefe, MEATINGPLACE.COM, 9/23/10

As the hog industry has exercised more discipline and prices --- and margins --- have improved, expectations are rising for Smithfield Foods Inc.’s future earnings.

Farha Aslam, an analyst for Stephens Inc., raised her earnings estimates for fiscal 2011 --- ending at the beginning of May 2011 --- to $2 per share from $1.80 per share. The boost is “driven by increased hog prices and a reduction in interest expense due to the sale of Butterball, partially offset by the increase in grain,” the costs of which will be seen on the company’s financial results mostly in the fiscal fourth quarter, Aslam wrote in a note to investors.

“The hog margin is very healthy and is expected to remain positive due to the tight supply of protein,” she wrote.

Grain prices are expected to take their toll in Smithfield’s following fiscal year, however, and Aslam lowered her projections for earnings per share in fiscal 2012, to $1.90 per share from $2. “The increase in grain costs should only be partially offset by a further reduction in interest expense,” she said.

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