Tuesday, June 14, 2011

Smithfield Foods Inc. (NYSE: SFD): Q4 Earnings Preview 2011

Smithfield Foods Inc. (NYSE: SFD) is scheduled to report fiscal fourth-quarter earnings before the opening bell on Thursday, June 16, 2011 Analysts, on average, expect the company to report earnings of 82 cents per share on revenue of $3.24 billion. In the year ago period, the company reported earnings of 18 cents per share on revenue of $2.91 billion. 

Smithfield Foods, Inc., together with its subsidiaries, engages in the production and marketing of fresh meat and packaged meat products in the United States and internationally. It involves in the production of hog, processing of meat, production of turkey, and live cattle operations. 

In the preceding third quarter, the Springdale, Arkansas based company's net income was $202.6 million or $1.21 per share, compared to $37.3 million, or $0.22 per share, in the year-ago quarter. On an adjusted basis, the company earned $0.84 per share in the third quarter. Revenue rose 10.2 percent to $3.19 billion from $2.88 billion in the year-ago period. Analysts, on average, expected the company to report earnings of $0.66 per share on revenue of $3.16 billion.

At its last earnings call in March, the company forecast that the hog production segment will be profitable in fiscal 2011 and beyond, despite higher grain prices. "Given the overall situation, we remain very excited about the growth prospects for this company in all business segments and expect to finish this fiscal year with record earnings and look forward to continued strong results in fiscal 2012," Larry Pope, president and chief executive officer of Smithfield Foods, said.

Meat producers such as Smithfield Foods Inc. are continuing to rebound from their low recession levels, as demand remains high and the measures they took to increase efficiency during the recession continue to take effect. The growing wealth in Asia has been a boon to the pork industry, as the meat is popular in this part of the world so demand has been strong. The company has benefited from higher meat prices, operational improvement and top line sales growth. 

The company recently signed a Memorandum of Understanding with China’s Dandong Port Group to explore business opportunities in Northern China.  The deal could augment Smithfield's efforts to further penetrate the growing pork market in China, already the world's largest pork consumer. China currently consumes around half of the world's pork and its agricultural operations are insufficient to meet demand, meaning import demand is steadily growing and providing companies with a strong source of revenue. It has also given the sector a measure of pricing power as the global supply tightens. Smithfield’s entry into China dates back to 2007, when the Virginia based retail giant had signed an agreement with a major Chinese trading company for the purchase of 60 million pounds of Paylean-free pork.

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