United States-Smithfield Foods.

UNITED STATES-SMITHFIELD FOODS.

Smithfield Foods Inc. is like to violate debt covenants in its fiscal second quarter of 2010, which ends in October, notes Stephens & Co. equity analyst Farha Aslam in a report to investors.

However, she expects Smithfield to be able to renegotiate its covenants and retain access to credit, albeit at a higher cost. She expects that any covenant renegotiation will cost the company between $10 million and $15 million a year in higher interest expense.

Aslam writes that she is maintaining her earnings estimates for Smithfield for the company’s fiscal fourth quarter and full year 2009, ending this month. But she reduced her earnings expectations for fiscal 2010, dropping it to 87 cents per share from $1.50 per share, due to higher costs.

Supply cuts that have been made so far have not returned Smithfield’s hog business to profitability, she surmises. While Smithfield has cut its herd by 10 percent, she notes in her report that other producers have not followed suit.