Episode Details

Smithfield Foods (SFD) Q2 2026 — Q2 2026 (quarter ended June 28; 8-K accepted 8:01am ET Aug 11, so BEFORE the open): adjusted EPS $0.62 vs a $0.599 estimate and sales $3,700M vs $3,650M. The stock fell 2.3% that session and 6.9% over four, from $24.44 to $22.76. Smithfield beat by two cents and the stock still fell. Adjusted operating profit rose just $2M to $300M - and every dollar of that came from Hog Production, the commodity segment management cut 42.9% for the full year in the same release. Packaged Meats, 88% of adjusted operating profit, fell 10.5%. THE CALL: HOLD (3/5, A CHEAP STOCK WITH A LOW-QUALITY BEAT) — base-case value ~$25 vs ~$22.76 today. KEY METRICS: - CALL: HOLD, 3/5. Fair value about $25 vs the $22.76 close on Aug 14, roughly 9.7% upside plus a 5.5% dividend. Bull $31, bear $20, weighted 35/45/20. We are BELOW the Street by 18%: 6 analysts, 5 buy, 1 hold, 0 sell, average target $30.58 (low $28, high $35) as of Aug 12. Post-print target trims, both keeping buy: Goldman Sachs $33 to $32 and Bank of America $32 to $29, both Aug 12. Barclays $32 dated Jul 16; Morgan Stanley $31 dated Mar 25. - THE QUARTER (ended Jun 28; 8-K accepted 8:01am ET Aug 11, so BEFORE the open): sales $3,700M, down 2.3%. Gross profit $478M vs $499M. GAAP operating profit $290M vs $260M; ADJUSTED operating profit $300M vs $298M, up just 0.7%. Net income attributable $238M, up 26.6% only because the year-ago quarter carried a $73M litigation charge. GAAP diluted EPS $0.60; adjusted $0.62. Shares 393,767,431 off the 10-Q cover; 395.8M diluted. - BASIS PROOF, BECAUSE THE FEEDS SWITCH IT: $0.62 is the ADJUSTED figure. FY2025 adjusted diluted EPS was $2.55 as filed and the four FY2025 quarters on that basis sum to $2.54. Data vendors carry $0.4775 for the June 2025 quarter, which is GAAP ($188M over 393,751,294 diluted); the company's adjusted figure was $0.55. Like-for-like the move is plus 12.7%, not the plus 30% the raw feed implies. Consensus was $0.599. - WHERE THE BEAT CAME FROM: Note 4 of the 10-Q shows $15M of gains on rabbi-trust assets - deferred-compensation investment marks - against $8M a year ago, and Smithfield does NOT exclude them from adjusted earnings. The quarter's effective tax rate was 21.4%, below the company's own 22.5%-24.5% full-year guide. Normalise both and adjusted EPS is about $0.58, UNDER the $0.599 bar. Derivative gains also swung $62M, from a $22M loss to a $40M gain. - THE SEGMENTS AND THE GUIDE CUT: Packaged Meats $265M vs $296M adjusted, margin 13.1% vs 14.2%; Fresh Pork $14M vs $30M; Hog Production $64M vs $22M. FY2026 adjusted operating profit guidance cut from $1,325M-$1,475M to $1,225M-$1,375M, a 7.1% midpoint cut, and sales from low-single-digit growth to flat. Hog Production alone was cut 42.9%, from $150M-$200M to $75M-$125M - and the first half already banked $68M, implying just $32M in the second. - BALANCE SHEET, DIVIDEND AND OWNERSHIP: net debt $654M, 0.4x trailing adjusted EBITDA of $1,720M; liquidity $3.65B. Dividend $1.25 annualised, up from $1.00, a 5.5% yield. Valuation: 9.2x consensus FY2026 adjusted EPS of $2.48 and 5.9x EV to EBITDA on an EV of $9,616M. WH Group holds 342,036,069 shares, or 87%, leaving a 13% float. The FY2026 guide midpoint of $1,300M is BELOW FY2025's actual $1,336M. What to watch: UP: the late-October Q3 print delivering second-half Packaged Meats profit near the $572M the guide implies, against $540M in the first half; or the $21.08 52-week low, where the yield reaches 5.9%. DOWN: a third straight year-over-year decline in Packaged Meats profit. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision. Learn investing free in the Charged Alpha app: https://chargedalpha.com/app?source=youtube&ref=video Educational only. Not financial advice.