Jefferies Lowers Price Target on Smithfield Foods (SFD), Sees Q4 Earnings Being Strongly Affected by Rising Costs
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Price: $22.76 +1.29%
Rating Summary:
11 Buy, 6 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
11 Buy, 6 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Jefferies is maintaining its Buy rating on shares of Smithfield Foods (NYSE: SFD), but is lowering its price target from $26 to $24.
The firm forecasts Q4 earnings of $0.78, below the Street's estimate of $0.82. It announces that its weak estimates are due to rising pork, hog and raw material prices.
Shares of SFD have fallen 20 percent of the last six months due to pork processing margins contracting unexpectedly. This resulted in a 15 percent jump in live hog price and a 3 percent drop in pork prices.
An analyst at Jefferies comments, "we expect live hog prices to be +21 percent, while favorable feed contracts will limit the rise in hog raising costs to 15 percent. Elevated feed costs into FY12 are a very real concern and we've reflected this in our model. SFD has less coverage in FY12 and we've modeled a 15 percent increase in hog raising costs and just +8 percent in live hog prices, which we expect to cut FY12 hog production segment profit in half to $65 million."
Jefferies is tweaking its FY11 and FY12 EPS estimates from $2.84 and $2.39 to $2.87 and $2.00. The firm is also raising its revenue estimates from $12.33 billion and $12.99 billion to $12.43 billion and $13.38 billion.
For more ratings news on Smithfield Foods click here and for the rating history of Smithfield Foods click here.
Shares of Smithfield Foods closed at $19.02 yesterday.
The firm forecasts Q4 earnings of $0.78, below the Street's estimate of $0.82. It announces that its weak estimates are due to rising pork, hog and raw material prices.
Shares of SFD have fallen 20 percent of the last six months due to pork processing margins contracting unexpectedly. This resulted in a 15 percent jump in live hog price and a 3 percent drop in pork prices.
An analyst at Jefferies comments, "we expect live hog prices to be +21 percent, while favorable feed contracts will limit the rise in hog raising costs to 15 percent. Elevated feed costs into FY12 are a very real concern and we've reflected this in our model. SFD has less coverage in FY12 and we've modeled a 15 percent increase in hog raising costs and just +8 percent in live hog prices, which we expect to cut FY12 hog production segment profit in half to $65 million."
Jefferies is tweaking its FY11 and FY12 EPS estimates from $2.84 and $2.39 to $2.87 and $2.00. The firm is also raising its revenue estimates from $12.33 billion and $12.99 billion to $12.43 billion and $13.38 billion.
For more ratings news on Smithfield Foods click here and for the rating history of Smithfield Foods click here.
Shares of Smithfield Foods closed at $19.02 yesterday.
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