December 21, 2007

Smithfield earnings expected to rise on pork exports

BB&T Capital Markets raised its earnings forecasts for Smithfield Foods based on expected strong pork exports due to the weak US dollar, lower pork pricing and higher demand in developing countries.

BB&T increased the forecast for Smithfield's fiscal third quarter ending January 27, 2008, to 20 cents per share from 1 cent per share, largely based on strong fresh pork margins.

It raised its forecasts for the fiscal year ending April 27, 2008 and the fiscal year ending April 26, 2009 to US$1.15 and US$1.40 from US$0.98 and US$1.20, respectively, on higher fresh pork margins, and slightly more bullish hog price assumptions, Agribusiness and Consumer Foods Analyst Heather Jones said.

The report cited USDA export data for October, which showed a 31.4 percent year-on-year increase in pork exports, driven by strong increases in China, Russia, and Canada.

Jones cautioned, however, against assuming US pork exports to continue at this pace, as China has recently pursued trade agreements with Brazilian pork producers and its disease problems have reportedly improved.

Jones also forecast that beef margins, solidly negative so far this quarter, are expected to stay weak "for some time."