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Smithfield, Tyson earning potential softened
High feed costs have led to a lowering in the earnings potential for Smithfield Foods and Tyson Foods. Meatingplace.com cites analyst Heather Jones’ downgrading in each of the firms’ ratings from a ‘buy’ to a ‘hold’ in response to the high cost of feeding cattle, hogs and poultry.
Jones, with BB&T Capital Markets, is impressed with Smithfield’s improvements in its packaged meats division over the last few years, but high grain costs resulted in her lowering the company’s fiscal 2012 earnings estimates from $2.20 a share down to $1.80. That’s despite the fact that pork fundamentals remain strong.
Similarly, Jones’ reduced Tyson’s fiscal 2011 earnings estimate from $1.64 a share to $1.55. Jones says Tyson likely has some of its feed covered through the fourth quarter, but is concerned that the company hasn’t hedged all of its exposure.
Jones says Tyson’s fundamentals are mixed. She says healthy pork margins are good for the company and beef margins have strengthened from the recent surge in live cattle prices.
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