Smithfield Foods raises FY25 adjusted operating profit outlook to $1.225B–$1.325B amid Packaged Meats momentum and Hog Production gains

Earnings Call Insights: Smithfield Foods (SFD) Q3 2025

MANAGEMENT VIEW

* CEO Shane Smith reported that Smithfield Foods delivered record third quarter adjusted operating profit of $310 million, marking an 8.5% increase year-over-year, and an adjusted operating profit margin of 8.3%. Smith stated, “We achieved record third quarter results by delivering innovation, value and convenience to our customers and consumers and through a continued disciplined execution of our strategies.”
* The Packaged Meats segment achieved its second highest third quarter profit on record, with performance driven by product mix improvements, a diversified portfolio, new product innovation, and operating efficiencies. Smith explained, “Our Packaged Meats segment performance was driven by product mix improvements, our well-diversified portfolio of products and price points, new product innovation and operating efficiencies.”
* The Fresh Pork segment was challenged by compressed industry market spreads and higher hog prices, but Smith highlighted mitigation efforts and the benefit of a vertically integrated model. Smith pointed out, “In the face of challenging market conditions for our Fresh Pork segment, I'm proud of our team for mitigating more than half of the year-over-year compression in the industry market spread.”
* The Hog Production segment saw adjusted operating profit more than double year-over-year, benefiting from higher hog prices and operational improvements.
* CFO Mark Hall stated, “We ended the third quarter with a strong balance sheet, and we have the financial flexibility to invest in growth and return value to our shareholders.”

OUTLOOK

* Smithfield raised the midpoint and tightened the range of its fiscal 2025 adjusted operating profit outlook. Hall stated, “We now anticipate total company adjusted operating profit in the range of $1.225 billion to $1.325 billion, which is a midpoint increase of $25 million from our guidance last quarter and $75 million from our original guidance.”
* The company expects total company sales to increase in the low to mid-single-digit percent range compared to fiscal 2024, excluding Hog Production segment sales to joint venture partners.
* Packaged Meats segment adjusted operating profit is anticipated to be $1.06 billion to $1.11 billion. Fresh Pork is projected at $150 million to $200 million, and Hog Production at $125 million to $150 million.

FINANCIAL RESULTS

* Consolidated sales in the third quarter were $3.7 billion, representing a 12.4% increase compared to the prior year.
* Adjusted net income from continuing operations was a record $230 million, while adjusted EPS reached $0.58 per share, up 9.4% year-over-year.
* Packaged Meats segment delivered adjusted operating profit of $226 million, with an adjusted operating profit margin of 10.8%, and sales of $2.1 billion, up 9.1%.
* Fresh Pork segment adjusted operating profit was $10 million, with margin at 0.5%. Sales for the segment were $2.2 billion, up 12% year-over-year.
* Hog Production segment reported adjusted operating profit of $89 million, up from $40 million a year ago. Sales were $813 million, up 10.1% year-over-year.
* Liquidity at the end of the quarter was $3.1 billion, including $773 million in cash and equivalents. Net debt to adjusted EBITDA ratio was 0.8x.
* Capital expenditures for the first nine months were $246 million, with full-year expected spending of $350 million to $400 million.

Q&A

* Leah Jordan, Goldman Sachs, asked about the balance of volume and price in Packaged Meats for the fourth quarter and next year. Steven France responded that retail sales were up 6% in Q3 and “we continue to execute our strategy to grow our value-added items and really focus on higher-margin units versus commodity bulk items.”
* Jordan also inquired about profitability and margin recovery. Smith stated, “I feel very good about where our packaged meats business stands today...our overall costs were up about 12%. And just the raw material side that was over $200 million increase in Q3 this year versus last year.”
* Heather Jones, Heather Jones Research, asked about the target for reducing the number of hogs produced and vertical integration. Smith responded, “We still -- it's still the right strategy to continue to reduce. Now as we go from $11.5 million to $10 million over the medium term...the goal of that reduction is to remove the commodity side volatility in Hog Production.”
* Jones also asked about belly market volatility. Smith said, “I don't see a lot of expansion taking place on Fresh Pork side.” Owens added, “We do believe our product categories are sitting priced reasonably...we're going to see that relatively higher belly market continue well into 2026.”
* Peter Galbo, BofA Securities, inquired about cost inflation and demand trends. Smith said, “I don't think we're seeing demand disruption, Peter. I think this is normal seasonality.”
* Benjamin Theurer, Barclays, asked about pricing initiatives and mix effects in Packaged Meats. France detailed, “We've really reduced the volatility in our business through our formula pricing on our private label business. And then on top of that, we have our well-known brands...really enables us to maintain those margins and pass along higher raw material costs.”
* Megan Christine Alexander, Morgan Stanley, asked about Packaged Meats profit outlook and mix optimization. France explained, “It's really taking the best view that we have of our business today, but also where we believe the market is going to end up...it's that mix optimization that you continue to hear us talk about is really focused on growing our unit volume on high-profit items, innovation and then the operational efficiency.”
* Max Andrew Gumport, BNP Paribas, asked about the cautious consumer environment and SNAP impacts. France responded, “It certainly remains cautious, and we really continue to observe value-seeking behavior.” Smith added, “We did take some of that into account into the guidance that Mark was referencing.”

SENTIMENT ANALYSIS

* Analysts maintained a neutral to slightly positive tone, expressing interest in volume and pricing dynamics, profitability amid cost pressures, and strategic shifts. Questions probed for margin management, competitive positioning, and consumer trends.
* Management’s tone was confident and disciplined during prepared remarks, emphasizing record results and strategy execution. In Q&A, management remained confident but acknowledged market challenges, saying, “We are pleased with our record third quarter results...underscores how well we're positioned to deliver growth and increase value for our shareholders over the long term.”
* Compared to the previous quarter, management’s confidence remained high, with an increased focus on cost management and strategic flexibility. Analysts’ tone was consistent, reflecting cautious optimism about forward guidance and market risks.

QUARTER-OVER-QUARTER COMPARISON

* The outlook for adjusted operating profit was raised by $25 million at the midpoint from the previous quarter, now projected at $1.225 billion to $1.325 billion.
* Packaged Meats segment guidance narrowed and shifted lower on the high end, reflecting persistent raw material cost pressures.
* Fresh Pork segment guidance was reduced at the high end, citing tighter market spreads.
* Hog Production guidance was raised, highlighting improved market conditions and operational efficiency.
* Analysts’ focus shifted toward margin sustainability, cost inflation, vertical integration strategy, and consumer trends, while management’s confidence in operational execution and strategic flexibility remained evident.

RISKS AND CONCERNS

* Management highlighted persistent higher raw material costs, compressed industry market spreads, and a cautious consumer spending environment as ongoing challenges.
* Potential impact from delayed SNAP benefits was acknowledged in guidance.
* The Fresh Pork segment continues to face tariff and market volatility, while the Hog Production segment remains exposed to commodity market risk.

FINAL TAKEAWAY

Smithfield Foods management emphasized record third quarter profitability and net income, highlighting the resilience of its business model and the benefits of a vertically integrated strategy. The company raised its fiscal 2025 adjusted operating profit outlook to $1.225 billion–$1.325 billion, supported by strong Packaged Meats performance, continued innovation, operational efficiencies, and improved Hog Production profitability. Management remains confident in navigating cost pressures and dynamic market conditions, focusing on delivering value, driving product mix optimization, and maintaining financial flexibility for future growth.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/sfd/earnings/transcripts]

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