Smithfield Foods (NYSE: SFD) is
the largest hog producer and pork processor in the world, offering fresh pork, smoked and boiled ham, bacon, sausage, hot dogs and ready-to-eat foods. Products are sold under such brand names as Smithfield, John Morrell, Cumberland Gap, Patrick Cudahy, Cook's Ham and Armour-Eckrich Meats. Smithfield is also the fifth-largest beef processor in the United States. Hormel Foods (NYSE: HRL) and Tyson Foods (NYSE: TSN) are major competitors.
The company surprised the Street late last month when it reported fiscal Q2 EPS of 24 cents and revenues of $3.46 billion. Analysts had been looking for 21 cents and $3.28 billion. Management noted that packaged meat profit margins more than doubled and earnings from international meat processing rose sharply. The SFD price popped on the news and then moved into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the shares with four "strong buys," four "buys," five "holds" and one "sell." Analysts see a 53 percent growth rate through the next year. The SFD P/E ratio (19.73), Price to Sales ratio (0.31), Price to Book ratio (1.37), Price to Cash Flow ratio (9.23) and Sales Growth rate (23.54%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 75 percent of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $24.40 and $35.79. A stop-loss of $26.25 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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