Smithfield Foods Earnings: Rising Costs HURT Margins as Profit Falls

Smithfield Foods Inc. (NYSE:SFD) reported its results for the fourth quarter. Smithfield Foods is a hog producer and pork processor that produces and markets a number of fresh meat and packaged meats products both domestically and internationally.

Investing Insights:  Is TV the Next Bullish Catalyst for Apple’s Stock?

Smithfield Foods Inc. Earnings Cheat Sheet

Results: Net income for Smithfield Foods Inc. fell to $79.5 million (49 cents per share) vs. $98.4 million (59 cents per share) a year earlier. This is a decline of 19.2% from the year-earlier quarter.

Revenue: Rose 3% to $3.21 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Smithfield Foods Inc. reported adjusted net income of 43 cents per share. By that measure, the company fell short of mean estimate of 53 cents per share. Analysts were expecting revenue of $3.26 billion.

Quoting Management: “Fiscal 2012 net income represented the second best year in Smithfield history — following a record year in fiscal 2011 — and underscored our ability to continue to deliver solid earnings to our shareholders,” said C. Larry Pope, president and chief executive officer. “This year, Smithfield aggressively returned capital to its investors through significant share repurchases. In the last twelve months, we repurchased 11.8 million shares, or 7% of the company, for $242 million. Ongoing share repurchases are a priority,” he stated. “Our packaged meats business delivered another outstanding year and, in spite of higher raw material costs, grew operating profit by more than $50 million or $.02 per pound. Our strategy for growth is beginning to pay off, as we continue to coordinate our sales and marketing team approach, focus on our twelve core brands, invest in consumer-focused advertising, and build a strong innovation pipeline to grow share and distribution,” Mr. Pope remarked.

Key Stats:

Revenue has risen the past four quarters. Revenue increased 9.2% to $3.48 billion in the third quarter. The figure rose 10.5% in the second quarter from the year earlier and climbed 6.6% in the first quarter from the year-ago quarter.

After beating analyst estimates for the two previous quarters, the company fell short of forecasts. In the third quarter, it topped the mark by 2 cents, and in the second quarter, it was ahead by 7 cents.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the first quarter of the next fiscal year has moved down from 67 cents a share to 65 cents over the last sixty days. For the fiscal year, the average estimate has moved down from $2.73 a share to $2.67 over the last ninety days.

Competitors to Watch: Hormel Foods Corporation, Tyson Foods, Inc., ZHONGPIN INC., Pilgrim’s Pride Corp., Seaboard Corporation, Diamond Ranch Foods, Ltd., Energroup Holdings Corp, and Polski Koncern Miesny DUDA SA.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

Don’t Miss These Additional Hot Stories:

WWDC Recap: Everything You Need to Know>>

Is Apple Driving Ford AWAY?

Are Gold and Silver Your Hedges Against Centrally-Planned Economies?