Smithfield Foods Inc. (SFD) recently surprised on the Zacks Consensus Estimate for the 5th quarter in a row as sales rose on strong pork exports. Despite shares being near multi-year highs, this Zacks #1 Rank (strong buy) is trading at just 9.9x forward estimates.
Smithfield Foods is the world’s largest pork processor and hog producer. It produces more than 50 brands of pork products and over 200 gourmet foods. Some of its popular brands include Farmland, Smithfield, Eckrich, Armour and John Morrell.
Smithfield Beat By 10% in the Fiscal Second Quarter
On Dec 8, Smithfield reported its fiscal second quarter results and easily beat by 7 cents. Earnings per share were 76 cents compared to the consensus of 69 cents.
Sales rose 10% to $3.3 billion on strength in the core brands. Core brands also saw sales rise 10% and volume increase 5%. Its fresh pork business benefited from strong exports, boosted by strong gains in shipments to Asia.
The international business has been a weak spot due to continued high raw material costs and soft demand in Europe, but it did improve from the first quarter’s performance.
Bullish Outlook
The company expects to see strong global demand for pork in the second half of 2012. It expects to sustain solid fundamentals in its hog production business and is encouraged by the turnaround in the international business.
The analysts also liked what they heard. 6 estimates have already moved higher for fiscal 2012 which has pushed the fiscal 2012 Zacks Consensus up to $2.49 from $2.41 in the last week.
This is still 15% below the $2.94 it made in fiscal 2011 however.
But the company is expected to return to growth in fiscal 2013. The Zacks Consensus rose to $2.69 from $2.63 in the last week. That is earnings growth of 8.2%.
New Multi-Year Highs
Shares have been hot recently. They hit a new multi-year high after the earnings report.
But there is still a lot of value in the shares. In addition to a P/E under 15, the company has a price-to-book ratio of 1.2. A P/B under 3.0 usually indicates value.
Smithfield also has a price-to-sales ratio of just 0.3. A P/S ratio under 1.0 usually means a company is undervalued.
The company also has a solid 1-year return on equity (ROE) of 15.2%.
Smithfield has put together a nice string of earnings beats. Its optimism is a bright point in the food industry which has been struggling with food inflation.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at traceyryniec.
