Jefferies Reiterates Buy on Smithfield Foods, Reduces PT to 24

Jefferies reiterated its Buy on Smithfield Foods SFD. At the same time, Jefferies lowered its price target on the company's stock from $26 to $24. In a research report published today, Jefferies stressed that Smithfield's traders are currently undervalued, in spite of the company's problems. In the report, Jefferies states, "SFD shares have dropped 20% over the last 6 weeks as industry pork processing margins saw unprecedented contraction - the result of a 15% jump in live hog & 3% drop in pork prices. While we acknowledge that the FY12 Street estimate needs to come down, SFD's current valuation (5X EBITDA) implies FY12 margins will be cut almost in half - unlikely in our view." On Friday, Smithfield closed the week at $19.02.