A decline in hog raising costs thanks to moderating grain prices will lift Smithfield Foods’ earnings in fiscal 2014, but higher hog prices will trim profit in the current year, a Wall Street analyst said.
Stephens Inc. analyst Farha Aslam bumped up her forecast for 2014 earnings by 35 cents, to $2.15 a share.
“The bulk of our higher expectations is driven by lower raising costs as grain prices have declined over the past six weeks,” Aslam said.
She also raised her price target on Smithfield stock to $21 from $18 and reiterated her “equal weight” rating.
But she shaved 10 cents from her estimate for Smithfield earnings in fiscal 2013, which ends in April, anticipating that increased hog prices will eat into fresh pork and packaged meat profits.
She now expects the company to earn $1.70 a share in fiscal 2013.
For Smithfield’s 2013, she anticipates:
•A loss of $90 million, or $5 to $6 per head, in the hog production group.
•A profit of $6 to $7 per head in fresh pork, reflecting expectations for ample hog supplies.
Packaged meat margins of $0.16-$0.17 per pound, above Smithfield’s fiscal 2012 level of $0.146 per pound.
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