MW Smithfield Foods' pork business set to rise as chicken and beef producers struggle: analyst

By Steve Gelsi

BofA sees a favorable backdrop for pork, while UBS says investors have overlooked Smithfield

Smithfield Foods Inc. drew buy ratings from analysts at BofA Securities and UBS on Monday as the pork producer exited its quiet period after its initial public offering late last month.

Coverage of Smithfield Foods (SFD) was initiated with a buy rating and a target price of $28 per share by BofA analyst Peter Galbo, who said the company offers a "superior financial profile versus closest peers" at a time when beef and chicken producers are struggling.

Smithfield Foods' stock rose 1.5% to $21.42 on Monday.

"This is the most favorable pork backdrop since 2018 - with hog farmer unit economics positive and processors earning solid margins," Galbo said in a research note. "Chicken processors are late cycle with margins near peak. Beef's challenges continue; while rancher profits are strong, processors are losing money."

Smithfield Foods went public on Jan. 28 at a price of $20 a share in an IPO that generated proceeds of $522 million.

Although the stock dipped below its IPO price in its first day of trading, it has since posted a modest gain of $1.10, closing at $21.10 on Friday.

Also read: Bacon giant Smithfield Foods' stock dips below reduced price in IPO

Smithfield Foods had been publicly traded until about 12 years ago, when it was taken private by Hong Kong's WH Group Ltd. (HK:288), which continues to own a majority of the company.

Smithfield ranks as the No. 1 fresh pork processor in the U.S., with about 23% of the market. It's also the largest hog farmer, with about 14.5 million animals.

"U.S. consumers are continuously seeking protein rich diets which should favor [Smithfield's] portfolio," Galbo said.

Galbo praised Smithfield Foods' execution, as well as product innovations such as ready-to-eat meatballs and packaging of the company's prime fresh deli products.

The company still faces potential challenges such as porcine diseases, food-safety issues and tariff costs from Mexico and China.

BofA is one of several investment banks that were underwriters of the Smithfield Foods IPO.

Meanwhile, UBS analyst Manav Gupta assigned a buy rating and a price target of $26 a share to Smithfield Foods.

"We believe the market is underappreciating [Smithfield's] integrated business model and productivity initiatives," Gupta said.

The company also offers investors a potential dividend that's in line with its target payout ratio of more than 30% of net income, he said.

UBS was not an underwriter of the Smithfield Foods IPO.

-Steve Gelsi

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February 24, 2025 11:34 ET (16:34 GMT)

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