We expect meat producer
Smithfield Foods Inc
) to miss expectations when it reports second quarter 2013
results on December 5.
While Smithfield Foods has generated positive surprises in the
past, it has not done very well this year, missing the Zacks
Consensus Estimate by 18.9% and 11.1% in the April and July
quarters, respectively. This in turn pulled down the average
surprise percentage to -4.2% in the trailing four quarters.
Smithfield Foods is one of the worst affected by the poor corn
crop this year, which increased feed costs in the last-reported
quarter, in turn increasing the cost of hog production. Ample hog
supply also impacted hog pricing, thus cutting margins on both
Pork segment restructuring initiatives are a positive, and
higher slaughtering could stem margin contraction here. But the
effect is unlikely to be long-lived, as weak demand will soon
lead to packaged inventory build-up, which will again impact
prices, and therefore, margins.
In the last 60 days, there were a couple of downward revisions
in estimates for the October quarter, which had the Zacks
Consensus Estimate moving down 2 cents (4.5%) to 44 cents.
Estimates for fiscal years 2013 and 2014 have moved up however,
from $1.82 to $1.84 (1.1%) and from $2.19 to $2.26 (3.2%),
The Zacks ESP (Expected Surprise Prediction) is -13.64% for
the October quarter, indicating that the company is likely to
miss estimates this quarter.
Performance across the sector has been mixed so far, with
) missing the Zacks Consensus by 23.1%,
beating the Zacks Consensus by 27.9% and
) reporting in line.
) is yet to report and given its Zacks ESP of 41.38%, it is
unlikely to disappoint.
SmithField, Hormel and Sanderson currently have a Zacks Rank
#3 (Hold), compared with Zhongpin, which has a Zacks Rank #5
(Strong Sell) and Tyson Foods, which has a Zacks Rank #2
ZHONGPIN INC (HOGS): Free Stock Analysis
HORMEL FOODS CP (HRL): Free Stock Analysis
SANDERSON FARMS (SAFM): Free Stock Analysis
SMITHFIELD FOOD (SFD): Free Stock Analysis
TYSON FOODS A (TSN): Free Stock Analysis
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