UNITED STATES-SMITHFIELD DOWNGRADED.
Expected recovery in pork packer and producer margins hasn’t materialized, and while Smithfield Foods has cut supplies, it’s not enough, says equity analyst Heather Jones of BB&T Capital Markets.
She downgraded Smithfield’s stock Friday to a "hold" from a "buy," and noted in a report to investors that she expects "it will be some time before [earnings per share] are north of $1."
Her estimates for fiscal year 2009’s earnings have been reduced to a loss of $1.12 a share, down from her previous estimate of a loss of 88 cents per share. For fiscal 2010, Jones expected the company to earn 93 cents per share, an estimate that’s been cut from $1.37 per share.
In her note, Jones wrote she had expected significant recovery in hog producer margins by April. Instead, both are in substantially in the red. Meanwhile, export demand has fallen, and herd liquidation has been "inadequate."
Furthermore, Smithfield appears to have done far more than its competition to adjust to the market’s changing realities, and so likely is bearing the brunt of the costs of liquidation.
