Overall Score:3
Trading Chart +1
Smithfield is showing bullish RSI divergence but note the correlation with lean hog futures
which have fallen out of bed
Analyst Opinion: 1
Barron’s made the bull case in an April 11th article, titled Can Smithfield Foods go Hog Wild?
| Strong Buy | 5 | |
| Buy | 4 | |
| Hold | 6 | |
| Underperform | 0 | |
| Strong Sell | 0 | |
Insider Buying: 1
There was significant insider buying in Sept 11. Usually stocks are higher within six months. SFD was higher but collapsed under
sinking live hog prices.
Management Discussion and Analysis: 0
Company is subject to various federal, international and state regulation for safety and environmental reasons
Results are highly cyclical and very dependent on commodity prices for feedstock, hog prices, fuel, packaging etc
Outbreak of disease and health scares will negatively impact results
Company is vulnerable to various health risks associated with the food industry
GIPSA proposed rule will negatively impact relationships with hog producers and customers
Company has high indebtedness, covenants associated with the credit facilities
Multiple lawsuits pending (totalling $15-30mm)
FY11 Pork segment operating profit increased by $214.7mm as a result of higher fresh pork prices (which more than offset higher raw materials)
FY11 Hog segment operating profit increased by $763mm due to a 29% increase in domestic market live hog prices
Widespread Ethanol15 use is increasing prices of livestock feed.
YTD 3Q12 sales increased primarily due to the Pork segment were ASPs increased 9% due to higher market prices for fresh pork and and improved sales mix in packaged meats
Gross Margins were negatively impacted due to higher raw material costs, Live hog prices increased to $66/cwt from $55. Raising costs increased to $64/cwt from $53 as a result of higher feed prices
Outlooks looks to be stable, with operating margins in packaged meats to average 10-15 cents / lbs. Hog production margins should average between $10-15 per head
$300mm CAPEX over the next 5-7 years to move to group pens from gestation stalls
23,000 employees under CBA, 3,700 whose CBA expires in 2012, relations are good
Liquidity is adequate, $925mm revolver, $275mm receivables facility,
Company has been redeeming debt as part of its debt reduction programs
Company has $506mm (as of 1/29/12) in investments in joint ventures and equity in various companies
Company is underfunded $373 million. Company contributes $100 million a year to pension fund
Stock Performance relative to the Market: -1
Sector Outlook: 1
Management is optimistic on the pork and hog producing segment, feel that they have a very good handle on margins
Cash Flow: 0
| May Year End | Yearly | YTD | LTM | ||||
| 2009 | 2010 | 2011 | 01/30/11 | 01/29/12 | 01/29/12 | ||
| Revenues | $12,488 | $11,203 | $12,203 | $9,086 | $9,885 | $13,002 | |
| COGS | 11,863 | 10,473 | 10,489 | 7,829 | 8,679 | 11,339 | |
| Gross Profit | 625 | 730 | 1,714 | 1,258 | 1,207 | 1,663 | |
| SG&A | 798 | 706 | 790 | 594 | 627 | 823 | |
| EBIT | (174) | 24 | 924 | 663 | 580 | 841 | |
| D&A | 271 | 242 | 232 | 174 | 182 | 240 | |
| EBITDA | 97 | 267 | 1,156 | 838 | 762 | 1,081 | |
| Capex | (179) | (175) | (177) | (112) | (199) | (264) | |
| Interest | (222) | (266) | (245) | (135) | (194) | (305) | |
| Working Capital | 290 | 58 | (34) | 29 | (150) | (213) | |
| Taxes | 33 | 149 | (78) | (190) | (140) | (28) | |
| FCF | 18 | 32 | 622 | 429 | 79 | 272 | |
| CFO | 270 | 258 | 616 | 391 | 211 | 437 | |
| CFI | 441 | (134) | 254 | 281 | (189) | (216) | |
| CFF | (674) | 209 | (946) | (542) | (228) | (632) | |
| Net Income | (198) | (101) | 521 | 423 | 282 | 380 | |
PEG Ratio: -1
| P/E | 8.78 | |||
| 2012 | 2013 | |||
| EPS | 2.69 | 2.79 | 3.7% | |
| PEG Ratio | 2.36x |
Valuation: 1
Value Pro shows a 88% upside from the current price of $20.16
Adjusted FCF for 7 yrs from 10 yrs
Adjusted growth rate to 5%
10 yr treasury at 3%
Company interest rate is approximately 7%
Equity risk premium assumed at 5%
Beta is taken from finance.yahoo
Adjusted investment rate to account for pension payments
Catalyst: 0
Hog price stabilization, increase in demand for packaged meats, lower feedstock prices