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Analyst lowers Smithfield 2013, '14 earnings estimates
Story Date: 7/18/2012
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Source: Chris Scott, MEATINGPLACE, 7/17/12
Citing a recent stock drop and concern about the upcoming grain harvest, Stephens Inc. analyst Farha Aslam has lowered earnings estimates for Smithfield Foods for both fiscal 2013 and 2014.
Aslam noted that Smithfield has locked in the bulk of its feed costs as the drought continues to park bad news in grain markets, but adds that the hot weather has also pressured pork demand and pork margins. The result is a reduction of Aslam’s earnings estimate for fiscal 2013 to $2.10 a share from $2.30 and a lower fiscal 2014 estimate to $1.85 from $2.50 a share. With crop futures at $7.85 a bushel — up from $5.50 a bushel a month ago — Aslam expects grain prices to continue to be elevated through the 2013 harvest.
Meanwhile, Smithfield executives are buying more shares even as analysts downgrade the company’s stock price over concerns that grain prices will cut into profits. Smithfield CEO Larry Pope bought 10,000 shares last week while Smithfield’s commodity hedging officer purchased a total of 10,000 Smithfield shares through July 12, according to filings with the Securities and Exchange Commission. Smithfield executives have bought a total of 26,000 shares since June 18, moves that one data analysis firm believes indicates company-wide conviction in Smithfield’s overall long-term strength.
Smithfield is coming down off of a string of record-profit fiscal years, as the company has been restructuring to reduce its dependence on commodity pork by building its consumer products business units. However, as input costs have risen, they've cut into the profit margins in the further processing arena.
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