BofA downgrades Smithfield Foods to Neutral as pork market weakens

BofA cut Smithfield Foods stock rating, citing weaker pork values and a lowered price target to $21 from $25. The stock traded at $18.88, near its 52-week low of $18.43. BofA reduced the price target multiple to 7.5 times from 8.0 times its 2027 EBITDA estimate. Since Smithfield's September 8 preannouncement, pork values and producer economics have deteriorated.

The stock plummeted 34.5% over the past six months, and three analysts lowered their earnings forecasts for the upcoming period. BofA's adjusted operating profit forecasts for fiscal years 2026, 2027, and 2028 were cut by 4%, 7%, and 5%, respectively. The estimates now stand 4%, 13%, and 10% below consensus for those years. The analyst noted Fresh Pork and Hog Production forecasts require further reduction due to worsening market conditions.

While the Packaged Meats outlook remains unchanged, BofA no longer sees a strong enough case to maintain a Buy rating, as estimates across the pork value chain continue to decline. Despite the bearish outlook, BofA sees the stock as undervalued at current levels. Smithfield Foods reported a record second-quarter profit, with adjusted earnings up 13% to $0.62 per share and revenue at $3.7 billion.

Stephens has also initiated coverage of Smithfield Foods, giving it an Equal Weight rating and a $22 price target.