Packaged pork and meat products maker Smithfield Foods, Inc. (SFD) Tuesday morning reported a wider-than-expected loss in the first quarter compared to a profit last year, hurt by higher animal feed costs. This has offset any increase in prices and the benefits derived from higher export volume due to a weaker U.S. dollar. The company's fresh pork operations and packaged meats business performed well.
Prices of corn and soybean, the key ingredients of animal feed, have surged nearly around 35% in the past one year as ethanol production has reduced the availability of corn. In order to tackle rising grain costs, many meat producers have reduced supply to increase prices.
The company noted that it continues to be challenged by high input costs as a result of the current ethanol policy in place, whereby 30% of the corn crop is being diverted from animal feed to ethanol production. This results in a sharp run-up in corn prices tied to world oil markets.
Last week, analysts at DA Davidson downgraded Smithfield Foods stock to "Underperform" and reduced the target price to $14 from $28. A week back, Lehman Brothers initiated coverage of Smithfield Foods stock with an Underweight rating and a price target of $26. On the same day, Lehman Brothers also initiated coverage of Smithfield's closest peer Hormel Foods Corp. (HRL) stock with an Equal Weight rating and a price target of $41.50.
Hormel Foods on Thursday reported a 9% decline in third quarter profit from last year on weakness at its Jennie-O Turkey Store segment, due to higher feed input and fuel costs. This was partially offset by a 10.4% increase in net sales, helped by growth in both dollar sales and volume across all five operating segments of the company.
Last month, another Smithfield peer, Kraft Foods Inc. (KFT) reported a 3.5% rise in profit for the second quarter to $732 million from a year ago, helped by gains from operations and certain commodity hedging activities. The company's organic top-line growth was driven by pricing actions to offset significantly higher input costs. Adjusted earnings per share grew 16% to $0.58 per share. Quarterly revenues increased 21.4% from the prior-year quarter to $11.2 billion.
First Quarter Results
The Smithfield, Virginia-based world's biggest pork processor reported first quarter net loss of $12.6 million or $0.09 per share, compared to a net income of $54.6 million or $0.41 per share in prior-year quarter.
Results for the latest quarter include a negative mark-to-market adjustment of about $20.1 million or $0.15 per share related to unrealized losses on changes in the fair value of the company's open commodity derivative contracts.
Results also included an after-tax income from discontinued operations of $15.9 million or $0.12 per share, compared to an after-tax loss from discontinued operation of $2.0 million or $0.02 per share in the previous year.
Loss from continuing operations was $28.5 million or $0.21 per share, compared to income of $56.6 million or $0.43 per share in the year-ago quarter.
The latest quarter's loss from continuing operations include impairment charges and operating losses totaling $5.5 million after-tax or $.04 per share related to asset disposals by Campofrio.
On average, thirteen analysts polled by First Call/Thomson Financial expected the company to report a loss of $0.04 per share for the first quarter.
Sales for the quarter grew to $3.14 billion from $2.62 billion in the same quarter last year. Nine Wall street analysts had a consensus revenue estimate of $2.87 billion for the first quarter.
Segmental Details
Sales for the Pork segment grew to $2.58 billion from $2.23 billion in the prior-year quarter. Operating profit for the segment increased more than two-fold to $61.7 million from $26.5 million in the previous year, reflecting sharply higher fresh meat profits driven by strong export volume increase of 124%. Exports benefited from the impact of a weak U.S. dollar. Fresh pork volume rose 33%.
The hog production segment sales totaled $725.8 million, higher than the year-ago quarter's sales of $605.6 million, while the segment recorded operating loss of $38.8 million, compared to an operating profit of $93.0 million in the prior-year quarter, as sharply higher feed costs offset an increase in live hog costs. Live hog market prices averaged $55.50 per hundredweight, marginally up from $53.50 per hundredweight, which was more than offset by raising costs of $61 per hundredweight, sharply higher than $49 per hundredweight in the prior-year quarter, due to higher feed costs.
Sales for the International segment surged to $405.3 million from $246.7 million in the comparable quarter a year ago. Operating profit for the segment was $5.9 million, lower than $14.9 million in the same quarter last year, as raw material costs moved to higher levels.
Other Metrics
Operating profit for the second quarter plunged to $2.5 million from $128.0 million in the prior-year quarter, as cost of sales jumped to $2.94 billion from $2.34 billion in the year-ago quarter.
Gross profit for the quarter was $196.9 million, down from $280.8 million in the prior-year quarter. Selling, general and administrative expenses increased to $190.6 million for the first quarter from $165.0 million in the year-ago quarter.
Commenting on the results, chief executive officer Larry Pope said, "Our fresh pork operations and our packaged meats business performed well in the face of sharply rising input costs. We are continuing to focus closely on our cost structure and improving plant operating efficiencies. Also, our new management structure is in place and moving forward nicely."
Guidance
Grain prices and live hog prices have been highly volatile and the outlook for hog production for the remainder of the calendar year is still unfavorable, the company noted.
Combined with uncertainty surrounding the economy and the U.S. dollar, the company is not in a position to make any prediction of future results.
However, the company continues to pursue its long-term strategy of emphasizing packaged meats business and improving fresh meat operations. This strategy is presently working and is improving the base of the company's business.
Stock Quote
In Tuesday's regular trading session, SFD is trading at $22.72, down $0.81 or 3.44% on a volume of 0.42 million shares. In the past 52-week period, the stock has been trading in a range of $16.61 to $34.09.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.