Shares of pork-producer Smithfield Foods (SFD) are down 2.8% in midday trading after fiscal second-quarter earnings fell 16% on higher input costs.
Smithfield has seen rising demand for its products from foreign markets, but feed costs, particularly the cost of corn, have cut into the company’s bottom line.
The producer of John Morrell, Armour and Farmland branded products reported a profit of $120.7 million, or 74 cents a share, down from $143.7 million, or 86 cents, a year earlier. Excluding special items, earnings fell to 76 cents from 80 cents. Sales rose 10% to $3.31 billion.
Analysts polled by Thomson Reuters had forecast earnings of 70 cents on revenue of $3.21 billion.
Gross margin dipped to 12.7% from 14.4% as input costs jumped 13%.
Still, analysts say Smithfield may be able to overcome feed cost pressure in the long run.
“Long term, we expect Smithfield to be a beneficiary of growing global demand for protein products,” wrote Tom Graves, an analyst with Standard & Poor’s. “With an an improved outlook for fiscal ’13 corn costs, we are raising our target price to $25 from $24.”
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