No Hog Heaven for Smithfield Foods

Smithfield Foods Inc. (NYSE: SFD) reported adjusted first quarter 2013 earnings per share (EPS) of $0.40 on $3.09 billion in sales before markets opened today. In the same period a year ago, the food producer reported diluted EPS of $0.49 on revenue of $3.09 billion. First-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.44 and $3.15 billion in revenue.

The company did not provide many specifics regarding its forecast for the fiscal year, other than to say that it expects margins in its package meats business “to be at the high end of the normalized range with 2-3% volume growth in fiscal 2013.” The company also expects operating profits in its international segment to be “in the upper half of the normalized range” for the full year.

The company’s president and CEO said:

Despite headwinds in our hog production business, improving fresh pork results combined with robust packaged meats profitability and higher packaged meats volumes, as well as strong international segment profitability should fuel solid results in fiscal 2013.

Smithfield appears to have avoided any significant impact from the strong dollar, but higher feed costs hurt the company’s margins in its fresh pork division. The company’s packaged meats division saw a 4% volume increase in the quarter, with core brands rising 7%.

The company will feel an impact from higher feed costs, but expects favorable hedging positions to keep costs in the mid-$60 range per hundredweight, compared with an industry average about $10 higher.

The company has also repurchased $350 million in stock over the past year and has another $250 million available.

Shares are down about 4.2% in premarket trading at $18.50. The current 52-week range is $17.55 to $25.12. Thomson Reuters had a consensus analyst price target of $22.11 before today’s results were announced.

Paul Ausick