Why Smithfield Foods Shares Heated Up

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Smithfield Foods were sizzling today, climbing as much as 12% after posting strong earnings results.

So what: The world's largest pork processor said that higher demand abroad helped drive higher revenue and profits. Sales for the quarter rose 3%, to $3.58 billion, ahead of estimates of $3.53 billion, while EPS of $0.58 beat expectations of $0.50. Its packaged meat segment, which makes up about half of revenue, was particularly strong, as CEO Larry Pope said sales were "on fire." The food processor said hog production margins had dropped by 8% in the quarter, but expects the segment to return to profitability by 2014. It also sees hog prices rising in the current quarter.

Now what:Despite the strong performance, pork is still a slow-growth industry, and market conditions determining profitability are essentially out of Smithfield's control, even though it's the world's biggest player. Share buybacks have helped boost earnings per share, and Smithfield looks solid going forward; but with only a 2%-3% increase in sales volume projected, I wouldn't expect many more jumps like today's.

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The article Why Smithfield Foods Shares Heated Up originally appeared on Fool.com.

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