RICHMOND, Va. (AP) — Smithfield Foods Inc. said Thursday that its net income rose more than 3 percent in the third quarter as the world's biggest pork producer saw gains in its packaged meats, hog production and international business.
The results topped Wall Street expectations and its shares rose more than 9 percent in morning trading.
The Smithfield, Va.-based company, whose brands include Armour, Farmland and its namesake, reported earnings of $81.5 million, or 58 cents per share, for the three-month period ended Jan. 27, up from $79 million, or 49 cents per share, a year ago.
Excluding a charge for early debt extinguishment and its share of consolidation costs at Spain's Campofrio, adjusted earnings were 69 cents per share. Analysts polled by FactSet expected 50 cents per share.
Smithfield Foods said its revenue rose 3 percent to $3.6 million. Analysts expected $3.53 billion.
Its shares rose $2.25, or 10.1 percent, to $24.55 in morning trading after rising to a 52-week high of $24.91 earlier in the session.
The company said its volumes in its packaged meats business such as deli meats, bacon, sausage, and hot dogs, rose 5 percent during the quarter and its profit margins grew.
"Our packaged meats business is on fire. We are extremely pleased on what's going on there," CEO C. Larry Pope said in a conference call with investors.
Smithfield expects its packaged meat volumes to grow at least 2 percent to 3 percent in 2013 and that the trend will continue in 2014. It also said it expects that lower supply and higher prices for competing proteins like chicken and beef will push up pork retail prices in 2013.
Pork producers like Smithfield have been caught in a tug of war with consumers. The company needs to raise prices to offset rising commodity costs, namely the corn it uses for feed. But consumers are still extremely sensitive to price changes in the current economy. By raising prices, Smithfield risks cutting into its sales should consumers cut back or buy cheaper meats, such as chicken.
Speaking to investors, Pope also outlined a long-term plan to grow its business over the next several years, including spending between $300 and $350 million annually to upgrade its facilities, increasing its consumer marketing spending and focusing on product innovation.
Last month Smithfield announced a joint venture with Kansas City Sausage Company and its sister company Pine Ridge Farms to help grow its packaged meats business. The company said the move would provide a growth platform in the breakfast and dinner sausage categories, which represent more than $4 billion in retail and foodservice sales annually.
The company also said Thursday it repurchased 8.2 million shares for $174 million in the third quarter.