July 8, 2008

 

Embattled Smithfield Foods may show turnaround by mid-2009 

 
 

Smithfield Foods Inc, the largest US hog and pork producer, may show a turnaround soon and therefore has long-term value despite challenging conditions, analysts said.

 

Smithfield has seen massive losses in hog production in the past few months due to high feed and energy costs.

 

However, analysts expect things to turn around by mid 2009 or into 2010.

 

Credit Suisse food analyst Robert Moskow wrote in a note to clients this week that investors with a two-year horizon might start looking at this stock again as a deep value play, but investors with six to 12 months should wait longer. 

 

Smithfield's stock has lost more than 40 percent of its value this year, and last week Standard & Poor's Rating Services downgraded Smithfield's corporate credit rating to BB-.

 

As a further sign of that pressure, Smithfield is selling its beef and cattle feeding operations to Brazilian meat company JBS SA. That deal, estimated to be worth US$565 million, is awaiting approval by US regulators.

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