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Smithfield Foods (SFD)
NASDAQ:SFD
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Smithfield Foods
(NASDAQ:SFD)
72Outperform
Positive Factors
Earnings
Smithfield Foods Inc reported strong first-quarter earnings, with EPS significantly exceeding consensus expectations due to profit upside across all three segments.
Hog Production
Hog production is expected to perform significantly better than last year driven by higher hog prices and lower grain prices.
Market Position
Smithfield Foods is seen as having attractive value after its transformation, which is expected to deliver solid growth and improved earnings resilience in a volatile sector.
Negative Factors
Earnings Volatility
Smithfield Foods' exposure to the more cyclical upstream part of the supply chain drives increased volatility in earnings and cash flow.
Investor Concerns
SFD shares are down ~8%, underperforming the S&P (-4%) and its protein peers (TSN -1%, PPC -6%), which is attributed to investor concerns regarding the potential impact from retaliatory China/Mexico/Canada tariffs.
Tariff Impact
The current China tariff rate could potentially lead to declines in hog and pork prices, presenting a risk to the company.
Smithfield Foods (SFD) vs. S&P 500 (SPY)
Market Cap
$9.03B
Dividend YieldN/A
Average Volume (3M)892.52K
Price to Earnings (P/E)―
Beta (1Y)0.44
Revenue GrowthN/A
EPS GrowthN/A
CountryUS
Employees36,500
SectorConsumer Defensive
Sector Strength81
IndustryAgricultural Farm Products
Share Statistics
EPS (TTM)0.58
Shares Outstanding393,112,700
10 Day Avg. Volume907,428
30 Day Avg. Volume892,522
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap1.05
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit5.02
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$27.75Price Target Upside39.38% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering9
Smithfield Foods Business Overview & Revenue Model
Company DescriptionSmithfield Foods, Inc. manufactures and markets packaged meats and fresh pork in the United States and internationally. Its Packaged Meats segment processes fresh meat into various packaged meats products, including bacon, sausage, hot dogs, deli and lunch meats, dry sausage products, ham products, ready-to-eat products, and prepared foods, such as pre-cooked entrees, bacon, and sausage to retail and foodservice customers in the United States. This segment markets its packaged meats products under the Smithfield, Eckrich, Nathan's Famous, Farmland, Armour, Farmer John, Kretschmar, Krakus, John Morrell, Cook's, Gwaltney, Carando, Margherita, Curly's, and Smithfield Culinary brands, as well as under private labels. The company's Fresh Pork segment process live hogs into a variety of primal, sub-primal, and offal products, such as bellies, butts, hams, loins, picnics, and ribs. This segment sells its fresh pork products to retail, foodservice and industrial customers, as well as to export markets, including China, Mexico, Japan, South Korea, and Canada. Its Hog Production segment produces and raises its hogs on various company-owned farms and farms that are owned and operated by third-party contract farmers in the United States and Mexico. The Hog Production segment also sells grains to external customers. The company's bioscience operations use raw materials from hogs that process to manufacture heparin products, including an active pharmaceutical ingredient that mitigates the risk of blood clots. The company was founded in 1936 and is based in Smithfield, Virginia. Smithfield Foods, Inc. is a subsidiary of SFDS UK Holdings Limited.
How the Company Makes MoneySmithfield Foods generates revenue primarily through the sale of fresh pork and packaged meat products. The company operates in two main segments: the Pork segment, which involves the production and sale of fresh meat products, and the Packaged Meats segment, which includes branded and private-label packaged products. Key revenue streams include sales to retailers, foodservice providers, and export markets. Smithfield Foods capitalizes on its vertically integrated supply chain, from hog farming to processing and packaging, to ensure efficiency and quality control. Significant partnerships with retailers and distributors, along with a strong brand portfolio, contribute to the company's earnings. Additionally, Smithfield Foods engages in strategic acquisitions to expand its market presence and product offerings.
Smithfield Foods Financial Statement Overview
Summary
Smithfield Foods shows resilience with improved profitability and strong cash flows, maintaining a stable financial position. However, declining revenue is a concern that could impact future growth. Continued focus on reversing revenue decline while maintaining cost efficiencies is crucial.Income Statement
Smithfield Foods demonstrated a recovery in profitability over the past year, with an impressive increase in gross profit and EBIT margins from a challenging previous year. The gross profit margin improved significantly to 13.42%. However, revenue has seen a decline from $16.2 billion in 2022 to $14.14 billion in 2024, indicating a negative growth trend. The net profit margin also improved to 6.74%, highlighting better cost management. Overall, the company is showing stabilization after a turbulent year, but declining revenue is a concern.―
Balance Sheet
The balance sheet of Smithfield Foods is solid with a moderate debt-to-equity ratio of 0.40, indicating manageable leverage levels. The equity ratio stands at 52.78%, suggesting a strong equity base relative to total assets. Return on equity (ROE) improved to 16.33%, reflecting enhanced profitability and efficient use of equity. The company's financial stability is evident, but the reduction in total assets over the years is noteworthy.72
Cash Flow
Smithfield Foods shows robust cash flow metrics with an improvement in free cash flow and operating cash flow. The operating cash flow to net income ratio is 1.19, indicating healthy cash generation relative to reported earnings. Free cash flow has grown, but the free cash flow to net income ratio of 0.83 suggests room for improvement in cash conversion. Overall, cash flow management appears strong, but potential for better efficiency exists.―
| Breakdown | ||
| Dec 2024 | Dec 2023 | Dec 2022 |
|---|---|---|
| Income Statement | Total Revenue | |
| 14.14B | 14.64B | 16.20B | Gross Profit |
| 1.90B | 889.00M | 1.50B | EBIT |
| 1.12B | -56.00M | 1.12B | EBITDA |
| 1.46B | 374.00M | 1.57B | Net Income Common Stockholders |
| 953.00M | 17.00M | 870.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |
| 943.00M | 687.00M | 547.00M | Total Assets |
| 11.05B | 13.32B | 13.85B | Total Debt |
| 2.36B | 2.46B | 2.47B | Net Debt |
| 1.42B | 1.78B | 1.92B | Total Liabilities |
| 5.00B | 5.83B | 6.28B | Stockholders Equity |
| 5.83B | 7.24B | 7.37B |
| Cash Flow | Free Cash Flow | |
| 787.00M | 681.00M | 179.00M | Operating Cash Flow |
| 1.14B | 1.03B | 517.00M | Investing Cash Flow |
| -469.00M | -322.00M | 193.00M | Financing Cash Flow |
| -464.00M | -533.00M | -477.00M |
Smithfield Foods Risk Analysis
Smithfield Foods disclosed 13 risk factors in its most recent earnings report. Smithfield Foods reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Smithfield Foods Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Performance Comparison
SFD
Smithfield Foods
22.60
2.37
11.72%
SW
Smurfit Westrock
39.62
-7.22
-15.41%
Smithfield Foods Earnings Call Summary
Earnings Call Date:Apr 29, 2025
(Q1-2025)
| % Change Since: 0.00%|
Next Earnings Date:Mar 31, 2026
Earnings Call Sentiment Neutral
Smithfield Foods reported a strong start to fiscal 2025 with record first-quarter profits and significant improvements across key segments. However, challenges such as tariffs affecting exports and market spread compression in Fresh Pork pose risks moving forward. Overall, while the highlights are significant, the lowlights present notable challenges, creating a balanced outlook.Q1-2025 Updates
Positive Updates
Record First Quarter Operating Profit
Smithfield Foods achieved a record first-quarter adjusted operating profit of $326 million, marking an 86% increase compared to $176 million in the first quarter of 2024. The adjusted operating profit margin was 8.6%, up from 5.1%.
Packaged Meats Segment Performance
The Packaged Meats segment delivered $266 million in adjusted operating profit with an impressive margin of 13.1%, even amidst higher raw material input costs.
Turnaround in Hog Production Segment
The Hog Production segment reported a profit of over $1 million, a significant improvement from a loss of $174 million in the first quarter of 2024, driven by improved market conditions and a more efficient cost structure.
Strong Balance Sheet
Smithfield Foods ended the quarter with a net debt to adjusted EBITDA ratio of 0.7x, well below their policy of 2x, providing financial flexibility to support growth strategies.
Increased Consolidated Sales
Consolidated sales for the first quarter were $3.8 billion, a 9.5% increase compared to the prior year, driven by higher feed and hog sales as well as higher average sales prices across segments.
Negative Updates
Challenges from Tariffs and Export Reductions
The company faces challenges from a 145% China tariff rate leading to reductions in exports to China, which previously accounted for about 3% of revenue.
Fresh Pork Segment Market Spread Compression
Fresh Pork operating profit declined to $82 million with a 4% margin due to a tighter industry market spread, as the CME lean hog price increased by 14% while the USDA cutout rose only 6%.
Consumer Trade Down
The company observed consumers trading down to less expensive alternatives, which could potentially compress margins in the Packaged Meats segment.
Uncertainties in Hog Production
Despite positive Q1 results, there are uncertainties related to the impact of tariffs on revenue and potential seasonal losses expected in Q4.
Company Guidance
During Smithfield Foods' first quarter 2025 earnings call, the company reported a strong start to the fiscal year with an adjusted operating profit of $326 million and a margin of 8.6%, marking an 86% increase from the previous year. The Packaged Meats segment achieved an adjusted operating profit of $266 million with a 13.1% margin, driven by product mix improvements and operational efficiencies, despite higher input costs. The Fresh Pork segment posted an $82 million operating profit with a 4% margin, while the Hog Production segment made a significant turnaround to a $1 million profit from a previous $174 million loss, attributed to favorable market conditions and cost structure improvements. Across all segments, Smithfield emphasized a focus on efficiency and cost savings, resulting in lower manufacturing, distribution, and SG&A costs. The company ended the quarter with a net debt to adjusted EBITDA ratio of 0.7x, providing financial flexibility to support growth strategies. Looking ahead, Smithfield reaffirmed its fiscal 2025 outlook for increased sales and operating profit amidst challenging market conditions.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.