Smithfield Foods (SFD) Warns On Pork Losses, Is The Stock A Bargain?
Smithfield Foods (SFD) is back in focus after management warned of a potential US$90 million operating loss in its fresh pork division and lower profit expectations in hog production.
The fresh warning from Smithfield Foods comes after a tough stretch for holders, with the stock at US$18.93 and the 1-year total shareholder return down about 15.8%.
Share price pressure has been steady rather than sudden. The 30-day share price return is down about 14.9% and the 90-day share price return is down about 24.6%, which suggests sentiment has been fading as investors reassess earnings risk and the value of future cash flows.
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Fresh bad news is now baked into Smithfield Foods at US$18.93 after a steep three month slide. Is that enough of a cushion for investors today, or does patience still look cheaper?
Most Popular Narrative: 21% Undervalued
On the most followed narrative, Smithfield Foods screens as undervalued, with a Fair Value of $24 against the last close at $18.93. This puts the current weakness in a different light for anyone focused on future cash generation and margins.
Although the vertically integrated model and ongoing automation, yield optimization and supply chain projects are designed to move Smithfield Foods toward a best in class cost structure, persistent volatility in fuel, freight and packaging costs could consume a large part of these efficiencies and cap improvements in operating margin and earnings.
See why 0 investors see Smithfield Foods as 21% undervalued.
Result: Fair Value of $24 (UNDERVALUED)
Still, the bear case on Smithfield Foods hinges on consumer trade downs squeezing packaged meats volume, and volatile fuel and freight costs eating into cost savings.
Find out about the key risks to this Smithfield Foods narrative.
Next Steps
Mixed views like this often create the most interesting setups. Check the data yourself and decide quickly where you stand on Smithfield Foods using the full 4 key rewards and 1 important warning sign.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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