Jefferies Boost PT on Smithfield (SFD) to $25 Following Q4 Results; Lovin' the Pork!
Tweet
Share
E-mailGet Alerts SFD Hot Sheet
Price: $22.25 -0.13%
Rating Summary:
11 Buy, 6 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
11 Buy, 6 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Join SI Premium – FREE
Jefferies maintains a Buy rating on Smithfield Foods (NYSE: SFD) following fourth-quarter earnings results, but boosted its price target 4.2 percent from $24 to $25.
On the results, Jefferies had several key takeaways. Smithfield: "1) has good visibility into Hog Production profits (feed hedges), 2) expects to pass through higher pork prices and hold on to Packaged Meat margins, and 3) expects Fresh Pork margins, driven by strong export tailwind, to bounce off of recent lows."
Fresh Pork margins: Management has guided to FY12 Fresh Pork segment margins at the "high end" of the $3-$7 normalized range, but made the strong case that margins could be higher driven by 1) still very strong Asian export demand & 2) growing evidence of herd liquidations in Europe." Jefferies has conservatively modeled $7 profit for FY11 and if proven wrong, they blame it on a higher number.
Packaged Meat: Jefferies took two key items away from the call: "1) branded business remains strong, and 2) SFD expects margins to improve from $0.12/lb level seen in F4Q."
Hog Production: Profits are expected to remain so-so, neither exceptional nor weak. Jefferies notes that Smithfield has about a 50 percent hedge on feed costs "at prices well below current market prices," indicating the segment should remain profitable through FY12.
Looking ahead, Jefferies is modeling for FY12 EPS of $2.04, but sees upside if Fresh Pork margins improve and share buybacks are front loaded. With its report, Smithfield authorized a $150 million buyback, saying that the stock was "severely under-priced."
For more analyst comments on Smithfield, click here. For a ratings history on SFD, click here.
Smithfield is flat pre-market.
On the results, Jefferies had several key takeaways. Smithfield: "1) has good visibility into Hog Production profits (feed hedges), 2) expects to pass through higher pork prices and hold on to Packaged Meat margins, and 3) expects Fresh Pork margins, driven by strong export tailwind, to bounce off of recent lows."
Fresh Pork margins: Management has guided to FY12 Fresh Pork segment margins at the "high end" of the $3-$7 normalized range, but made the strong case that margins could be higher driven by 1) still very strong Asian export demand & 2) growing evidence of herd liquidations in Europe." Jefferies has conservatively modeled $7 profit for FY11 and if proven wrong, they blame it on a higher number.
Packaged Meat: Jefferies took two key items away from the call: "1) branded business remains strong, and 2) SFD expects margins to improve from $0.12/lb level seen in F4Q."
Hog Production: Profits are expected to remain so-so, neither exceptional nor weak. Jefferies notes that Smithfield has about a 50 percent hedge on feed costs "at prices well below current market prices," indicating the segment should remain profitable through FY12.
Looking ahead, Jefferies is modeling for FY12 EPS of $2.04, but sees upside if Fresh Pork margins improve and share buybacks are front loaded. With its report, Smithfield authorized a $150 million buyback, saying that the stock was "severely under-priced."
For more analyst comments on Smithfield, click here. For a ratings history on SFD, click here.
Smithfield is flat pre-market.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Walmart (WMT) PT Lowered to $130 at UBS on Investment Narrative's Competing Dynamics
- Investing.com’s stocks of the week
- Beike (BEKE) PT Raised to $23 at Morgan Stanley
Create E-mail Alert Related Categories
Analyst Comments, Insiders' BlogRelated Entities
Jefferies & Co, EarningsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
