The Smithfield Packing Company, which is a subsidiary of leading meat producer Smithfield Foods, Inc. , recently announced plans to stop production of bone-in ham at its plant in Landover, Md as the facility failed to fulfill fast-changing production needs. The bone-in ham production will now be shifted to Smithfield’s facilities in North Carolina and Kentucky.
Thereafter, Smithfield will shut down the Landover plant by early fall, thus impacting about 175 workers. However, the company will employ some of the employees at other facilities.
Recently, Smithfield has been focusing on improving its product mix in differentiated, branded and value-added products, both domestically and in the export markets. Smithfield is also increasing its focus on consumer convenience by introducing more ready-to-eat foods.
We believe that Smithfield’s continued focus on brand building investments and innovation, improving packaged meat margins, driven by favorable product mix and increased marketing of its core brands and production of healthier products are expected to benefit earnings in the upcoming quarter.
Smithfield reported better-than-expected earnings of 58 cents in early March. Total sales also beat the Zacks Consensus Estimate and increased 3.0% year over year to $3.6 billion. Strong momentum in packaged meat business, solid contribution from international operations and volume growth in all the categories drove fiscal third quarter 2013 results.
However, Smithfield expects weak business from the Hog Production segment in fiscal 2013 but remains positive toward the its risk management strategy, which we believe will help in limiting the impact of rising grain costs thus make the segment profitable.
Currently the stock carries a Zacks Rank #3 (Hold). Some other meat producing companies that are performing well include Hillshire Brands Company , Tyson Foods Inc. (TSN - Analyst Report) and Pilgrim’s Pride Corp (PPC - Snapshot Report). Hillshire Brands and Pilgrim’s Pride hold a Zacks Rank #1 (Strong Buy), while Tyson carries a Zacks Rank #2 (Buy).