Smithfield Foods' Q3 2025: Contradictions Emerge on Hog Production, Pricing Strategies, and Profitability Outlook

Date of Call: October 28, 2025

Financials Results

• Revenue: $3.7B, up 12.4% YOY
• EPS: $0.58 per share (adjusted), up 9.4% YOY (from $0.53)
• Operating Margin: 8.3% adjusted operating profit margin, down from 8.6% in the prior year

Guidance:

• Total company adjusted operating profit now expected $1.225B to $1.325B (midpoint +$25M vs prior quarter; +$75M vs original)
• Total company sales expected to increase low- to mid-single-digit percent (excludes Hog Production sales to JV partners)
• Packaged Meats adjusted operating profit: $1.06B to $1.11B
• Fresh Pork adjusted operating profit: $150M to $200M
• Hog Production adjusted operating profit: $125M to $150M
• Capital expenditures expected $350M to $400M for fiscal 2025 (timing shifts into 2026)
• Expectation of $1.00/share annual dividend subject to board discretion

Business Commentary:

• Record Profitability and Revenue Growth:
• Smithfield Foods reported record third quarter adjusted operating profit of $310 million, representing an 8.5% increase year-over-year, and an adjusted operating profit margin of 8.3%.

• The growth was driven by successful product mix improvements, operational efficiencies, and innovation in the Packaged Meats segment, despite challenging raw material costs and consumer spending environments.

• Packaged Meats Segment Performance:

• The Packaged Meats segment achieved the second highest third quarter profit, with adjusted operating profit of $226 million and a margin of 10.8%.

• This was driven by product mix improvements, strategic volume growth, and innovation in high-margin products, such as packaged lunchmeat and quarter hams, which offset higher raw material costs.

• Fresh Pork Segment Challenges and Execution:

• The Fresh Pork segment experienced a compressed industry market spread, with a $40 million unfavorable impact on profitability during the third quarter.

• Despite this, the segment delivered 5% volume growth in the U.S. retail channel by optimizing the net realizable value of each hog and operating with agility across multiple channels.

• Strategic Cost Reduction and Diversification:

• The Hog Production segment's adjusted operating profit more than doubled, driven by improved commodity markets and operational performance improvements, such as improved sow productivity and feed conversion.
• Smithfield's strategy to reduce hog production by 30% to approximately 10 million hogs aims to mitigate commodity fluctuations and ensure a sufficient supply of high-quality raw materials.

Sentiment Analysis:

Overall Tone: Positive

• Management reported a record Q3 adjusted operating profit of $310M (up 8.5% YOY) and record adjusted net income of $230M with adjusted EPS of $0.58 (up 9.4% YOY). They raised and tightened FY25 adjusted operating profit guidance (now $1.225B–$1.325B) and cited strengthened balance sheet (net debt/EBITDA 0.8x, $3.1B liquidity), framing performance and outlook as driven by execution across segments.

Q&A:

• Question from Leah Jordan (Goldman Sachs Group, Inc., Research Division): I just wanted to ask about packaged meats. I saw that volumes were flat in the quarter. You talked about a cautious consumer, you're even kind of considering some SNAP funding changes here. So as you look to the fourth quarter and maybe an early look into next year, how are you thinking about the balance of volume and price as top line drivers there? And I may have missed it, but I recall last quarter, you were talking about 1% volume growth in this segment for the full year. I mean, any change to that look as you think about elasticity in the current environment?
  Response: Packaged Meats is gaining share despite a soft retail environment by focusing on value-added, higher-margin items and innovation; retail dollars and units improved in Q3, supporting continued volume/price mix execution.

• Question from Leah Jordan (Goldman Sachs Group, Inc., Research Division): Okay. That's very helpful. And then just sticking with packaged meats, just a little bit more on profitability, just given the continued input cost pressure there. And just how are you thinking about the ability to keep -- putting price through? And then as you kind of look into '26, how do you be thinking about the long-term margin recovery there in the time line there?
  Response: They have been able to take pricing to offset significant raw-material inflation (roughly 12% higher costs and ~ $200M raw-material impact in Q3) and are mitigating the remainder via operational efficiencies across manufacturing, supply chain and SG&A.

• Question from Heather Jones (Heather Jones Research LLC): I wanted to talk about your -- ask about your comment regarding another 30% decline in the final target for number of hogs. And I'm asking because the packaged meats environment is getting increasingly competitive, new capacity coming on, I think it's next year in sausage and bacon. So just was wondering how you're thinking about that ultimately and how you think about Smithfield's vertical integration as a competitive advantage vis-a-vis the rest of the space?
  Response: They're proceeding to reduce company-owned hog production toward ~30% integration to remove highest-cost farms and commodity volatility while maintaining adequate supply for Fresh Pork and Packaged Meats.

• Question from Heather Jones (Heather Jones Research LLC): And the follow-up, just wondering, I mean, clearly, this year, input costs have been affected by widespread disease. But as we're thinking about over the next few years and more of the industry becomes forward integrated into packaged meats and all, are you all expecting more volatility on that belly side? And is there anything you can do to mitigate that, just less of those become available to trade on the open market?
  Response: They expect elevated pork and belly markets into 2026, will monitor disease/seasonality, and see limited industry expansion—no immediate mitigation beyond active market monitoring and channel diversification.

• Question from Peter Galbo (BofA Securities, Research Division): Maybe to stick on the topic of cost inflation. I guess, Shane, like one of the surprises was how high some of the cut markets remained over the course of the summer between bellies and trim. But now even since the end of the quarter, those have come in quite a bit. So I just want to get maybe an understanding from you whether that's just normal seasonality in terms of what you've seen even since the start of the quarter? Or has there been any sort of demand destruction that's caused some of the hog markets to kind of roll a bit more? Additional color there would be helpful.
  Response: Management sees recent declines as normal seasonality, not demand destruction; demand remains strong and pork is well positioned versus other proteins.

• Question from Peter Galbo (BofA Securities, Research Division): Great. And Shane, I actually wanted to get your perspective on beef as well. You mentioned it a little bit. I know it can be upwards of like 20% of your buy for packaged meats. Obviously, we've had some commentary out of the administration, both kind of informally and formally through USDA. But just -- how do you kind of see the beef trim markets shaping up over the next call it, 12 months? Do you feel like there's potential for some relief there? It can be, again, a decent chunk of your raw material buy and it's been a pressure point? So would love your perspective on that going forward.
  Response: They do not expect material beef-trim relief near-term; forecasts point to recovery in late 2027 and potential Argentina supply would be marginal (~1% of U.S. production).

• Question from Benjamin Theurer (Barclays Bank PLC, Research Division): Shane, Mark, thanks for opening space for some questions here. Most of it has been asked, but just wanted to follow up a little bit within Packaged Meats across the portfolio, your brand versus private label. Obviously, a very successful give or take 9% increase here on pricing with essentially no impact on volume. So can you help us understand a little bit about the pricing initiatives and the mix effect maybe in between the different segments and the strategy you've been following? And how should we think about this price level as we move into the fourth quarter and maybe into the first quarter of next year? Is that something you think you could stick on? Or is there a component of it that might come back if the commodity markets were to come down? That would be my first question.
  Response: Formula pricing on private label (≈40% of retail) reduces volatility, and brand loyalty plus disciplined, targeted promotions enable sustaining price levels and margins while capturing mix benefits.

• Question from Benjamin Theurer (Barclays Bank PLC, Research Division): Okay. Got it. And then just for clarification, you've lowered the CapEx guidance for the year. So maybe a little bit of clarity here and like what is delaying that? Is that a delay? Or is that just a review? How should we think about the lower CapEx versus the prior guidance?
  Response: CapEx reduction is timing-related: projects shifted into early 2026 (plant availability/downtime), not a change in strategic investment priorities.

• Question from Megan Christine Alexander (Morgan Stanley, Research Division): Just a couple of follow-ups from me as well. First, on the Packaged Meats profit outlook, I was wondering if we could just go back to Leah's question, if you could just unpack the change and the deceleration kind of in the year-over-year profit decline that's implied in the fourth quarter for Packaged Meats? And is there any way to just contextualize to what extent does that just reflect maybe pricing lagging the raw material costs because they stayed higher for a bit longer? And how should we think about that correcting as pricing catches up in the first half of next year, if that's the case?
  Response: Packaged Meats guidance reflects category- and channel-specific timing for pricing pass-through, mix optimization, and efficiencies; private-label exposure and customer dynamics create staggered timing across categories.

• Question from Megan Christine Alexander (Morgan Stanley, Research Division): Okay. That's helpful. And that's a good segue to my follow-up, which is just -- Shane, and you talked a lot about all the momentum you're seeing in the strategies and Packaged Meats, the mix improvements, efficiencies and innovation. Maybe if we just could take a step back. Can you give us a sense of what inning you think you're in on these strategies, particularly around the mix optimization and the efficiency side of things, just provided a lot of ballast in the margins this year? I'm just trying to think about how that trends through next year and beyond?
  Response: These strategic moves are ongoing; mix shifts (holiday ham to everyday items), capacity investments (e.g., dry sausage) and vertical-integration benefits continue to drive sustainable margin improvement across the company.

• Question from Max Andrew Gumport (BNP Paribas Exane, Research Division): You mentioned throughout the call the cautious consumer spending environment that you're seeing now. I was hoping you could expand on what you're seeing and how that's informing your outlook for the next several months?
  Response: Consumers are value-seeking and trading across price tiers; Smithfield's broad branded and private-label portfolio positions them to capture demand across income segments and preserve volume.

• Question from Max Andrew Gumport (BNP Paribas Exane, Research Division): Great. And then just related to that, you had mentioned in the prepared remarks that your outlook for 4Q, it embeds an impact from delayed SNAP payments. I was hoping you could quantify what that impact is that's embedded in your outlook for 4Q and then provide a bit of color for how you got to that quantified impact?
  Response: SNAP-related dollars represent roughly 7.5% of industry spending; management views any disruption as a concern for affected households but expects only a relatively minor overall impact to Smithfield's demand and has factored some of that risk into guidance.

Contradiction Point 1

Hog Production and Market Outlook

It reflects differing perspectives on the company's strategic approach to managing hog production and its impact on the market, which could influence profitability and investor confidence.

What is the impact of reducing hog numbers by an additional 30% on the competitive packaged meats market? Are there concerns about belly market volatility? - Heather Jones(Heather Jones Research LLC)

2025Q3: Smithfield aims to reduce the number of hogs produced to remove higher-cost farms, maintaining a vertically integrated model. - Shane Smith(CEO)

How do you view the hog crush and its impact on hog production and fresh pork profits? - Benjamin M. Theurer(Barclays Bank PLC, Research Division)

2025Q2: We are comfortable raising guidance for Hog Production and have visibility into the second half. We expect lower hog production compared to last year, which should support pork prices. - Shane Smith(CEO)

Contradiction Point 2

Pricing Strategy and Impact on Profitability

It involves changing narratives on pricing strategies and their impact on profitability, which directly affects investor expectations and financial forecasting.

What caused the implied profit decline in Packaged Meats and its relation to pricing and raw material costs? - Megan Christine Alexander(Morgan Stanley, Research Division)

2025Q3: Pricing adjustments are ongoing, with flexibility in private label and branded pricing strategies. Q4 guidance reflects current market and competitive factors, with future pricing adjustments based on market conditions. - Steven France(President of Packaged Meats)

What changes have you observed in the packaged meat market's promotional strategies, and how will you approach promotions for the rest of the year? - Leah Jordan(Goldman Sachs)

2025Q1: Pricing strategies vary among competitors, but our focus remains on long-term growth.We prefer consistent consumer acceptance over short-term promotions. - Steve France(President, Packaged Meats)

Contradiction Point 3

Hog Production Profitability and Optimization Strategy

It involves differing perspectives on the profitability of the Hog Production segment and the strategic approach to reducing hog numbers, which are critical for financial projections and operational planning.

How does the 30% reduction in hog numbers align with the competitive packaged meat market, and does it raise concerns about belly market volatility? - Heather Jones(Heather Jones Research LLC)

2025Q3: Smithfield aims to reduce the number of hogs produced to remove higher-cost farms, maintaining a vertically integrated model. - Shane Smith(CEO)

Can you explain the improved hog production industry profitability, notably in the first two months of this year? - Peter Galbo(Bank of America)

2024Q4: 2025 is expected to be a profitable year for hog production. - Shane Smith(CEO)

Contradiction Point 4

Packaged Meats Volume and Pricing Strategy

It involves differing statements on the primary drivers of growth in the Packaged Meats segment, which are crucial for understanding the company's competitive positioning and market strategy.

How should we balance volume and pricing as revenue drivers for packaged meats in Q4 and beyond? Has the full-year volume growth outlook for this segment changed? - Leah Jordan(Goldman Sachs Group, Inc., Research Division)

2025Q3: Despite a soft retail environment, Smithfield is gaining ground. Retail sales were up 6%. Both dollar and unit share increased slightly. - Steven France(President of Packaged Meats)

Could you elaborate on the annual sales guidance, particularly segment-specific factors, and discuss projected industry profitability improvements in hog production? - Peter Galbo(Bank of America)

2024Q4: Our top line guidance is for low- to mid-single-digit growth. Expectation of modest volume growth across all segments except Hog Production. - Mark Hall(CFO)

Contradiction Point 5

Pricing Strategies and Cost Management

It involves the company's statements regarding its ability to manage pricing and mitigate cost pressures, which directly impacts financial performance and investor expectations.

How is the company managing pricing power in packaged meats amid rising input costs? What's the timeline for long-term margin recovery? - Leah Jordan(Goldman Sachs Group, Inc., Research Division)

2025Q3: Smithfield's Packaged Meats segment is showing strong resilience, with a sales increase and solid profit margin of 10.8%. Despite higher raw material costs, Smithfield managed to mitigate inflation through pricing and operational efficiencies. - Shane Smith(CEO)

How will recent cost inflation impact Packaged Meats' second-half performance? - Heather Lynn Jones(Heather Jones Research LLC)

2025Q2: Our strategies are in place to mitigate raw material cost impacts. We anticipate a strong second half given our pricing mechanisms and diversified product portfolio. - Steven J. France(President of Packaged Meats)