Earnings for Smithfield Foods should improve due to strong pork exports, according to BB&T Capital Markets. BB&T raised its earnings forecast for Smithfield's fiscal third quarter to 20 cents per share from 1 cent per share, due to strong fresh pork margins.
USDA export data for October showed a 31.4% year-on-year increase in pork exports, due to strong increases in China, Russia, and Canada.
"We estimate that a large proportion of the increase in exports to China was the 60- million-pound business that Smithfield secured earlier this year," Consumer Foods Analyst Heather Jones wrote in a note to investors. "Given the surge in grain/meal and dry bulk freight costs, it has also become more cost effective for importers to import finished product, such as pork, rather than the grain to produce their own hogs and pork," she added.
She added, however, that U.S. pork exports may not continue at this pace, as China has recently said they would purchase Brazilian pork products. Also, China’s swine disease problems have reportedly improved.
Jones also forecast that beef margins, solidly negative so far this quarter, are expected to stay weak "for some time."