BB&T Upgrades Smithfield Foods To Buy, $28 PT

BB&T Capital Markets has upgraded Smithfield Foods SFD from Hold to Buy as margins for fresh pork and hog production have shown sustainability due to strong export demand and company efficiency. In the report, BB&T writes "We recently had the opportunity to meet with Smithfield's Pork Division management and tour its Crete, NE plant. The plant is state-of-the-art and very efficient; it utilizes robotics in many of the more difficult cut floor tasks. The initiative has been very successful and will likely be rolled out to other SFD plants. The Crete plant is the largest exporter to Japan and management commentary was bullish with regards to demand there. Yen appreciation has offset much of the increase in carcass prices, which has supported demand. Also, Japanese livestock production is expected to be disrupted for some time due to the earthquake/tsunami tragedy. Radiation contamination fears should also fuel increased demand for imported product. Finally, some cold storage inventories in Japan were compromised by loss of power and will likely have to be replenished. The magnitude of these factors is unclear, but some meaningful lift in demand in that market seems assured and Smithfield should be a primary beneficiary." BB&T has also initiated a $28 price target on Smithfield Foods, which closed yesterday at $22.69.