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What: Shares of Smithfield Foods were sizzling today, climbing as much as 12% after posting strong earnings results.
So what: The world's largest pork processor said that higher demand abroad helped drive higher revenue and profits. Sales for the quarter rose 3%, to $3.58 billion, ahead of estimates of $3.53 billion, while EPS of $0.58 beat expectations of $0.50. Its packaged meat segment, which makes up about half of revenue, was particularly strong, as CEO Larry Pope said sales were "on fire." The food processor said hog production margins had dropped by 8% in the quarter, but expects the segment to return to profitability by 2014. It also sees hog prices rising in the current quarter.
Now what: Despite the strong performance, pork is still a slow-growth industry, and market conditions determining profitability are essentially out of Smithfield's control, even though it's the world's biggest player. Share buybacks have helped boost earnings per share, and Smithfield looks solid going forward; but with only a 2%-3% increase in sales volume projected, I wouldn't expect many more jumps like today's.
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The article Why Smithfield Foods Shares Heated Up originally appeared on Fool.com.Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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