Smithfield Foods CEO Larry Pope has insisted the group is under-valued after shares in the meat firm fell more than 7% after fourth-quarter results that failed to meet analyst expectations.
In its earnings release today (14 June) Smithfield booked fourth-quarter earnings of $0.49 a share, down 19% and shy of consensus analyst estimates of $0.53 a share.
However, speaking during a conference call with analysts, Pope defended the group’s performance and insisted the market did not fully appreciate the group’s potential, particularly given its increased focus on branded packaged meats.
“We believe that Wall Street does not appreciate the changes that the company has made over the past several years,” Pope insisted. “And I am willing to put my money where my mouth is,” he added.
Detailing Smithfield’s plans for a $250m share buy-back scheme, Pope said the company was “happy” to buy shares at their present value because management feels the price does not fully reflect Smithfield’s value. The group trades at about 7.4 times earnings.
Management incentive packages have also been restructured and are now tied to the firm’s stock price or the performance of the packaged foods business, he revealed.
“I am riding in the same boat you are and am even more closely aligned than I ever have been. This management team is committed to growing shareholder value-added,” Pope said.
He insisted Smithfield is well-positioned to drive future growth thanks to its shift of focus onto value-added processed meats.
Management suggested there is “more good to come” from the unit, where growth is expected to be driven by increased marketing, investments in production facilities and an increased level of product development as it moves to a “consumer-based marketing model”. Management added that packaged meats benefit from “solid margins” that are less prone to the swings of commodities markets.
“The big news for you is the packaged meats business – that is the focus of this company every day,” Pope revealed. “Our bacon business and our hot dog business is solid and we are seeing growth in our brands.”
Pope said Smithfield had seen some weakness in the first quarter of fiscal 2013 but insisted it was not “dampening our enthusiasm for the year”.
“We feel good about the packaged meats business, we are raising guidance on that, we have warned on some volatility in fresh pork and hogs, but we feel good about 2013.”