Smithfield Foods Announces 87% Stake In Campofrio, BB&T Maintains Buy Rating

BB&T Capital Markets has published a research report on Smithfield Foods SFD after the company announced its consideration of acquiring an 87% stake in European meat processor Campofrio, a 50% jump over its current holdings. In the report, BB&T writes "Our initial take was that although our broader thesis remains bullish due to constructive industry fundamentals, the transaction was an incremental negative for several reasons: it would increase leverage, share count or both; potentially reduce management's focus on the ongoing turnaround in its pork business, as well as the nascent turnaround effort in HPG; and, finally, that it may signal a return to the actively acquisitive SFD of the past, which did not always result in enhanced shareholder value. Finally, we are somewhat cautious regarding how the purchase would be funded. Following further consideration and insights gathered from the conference call, we have tempered our view somewhat, but still harbor some concerns." BB&T maintains its Buy rating and $28 price target. Smithfield Foods closed yesterday at $23.35.