Smithfield Q3 Profit Falls as Upstream Pork Weakness Offsets Packaged Meats Gains

Smithfield Foods reported a sharp decline in fiscal third-quarter earnings as weaker pork markets and export headwinds weighed on its upstream businesses, offsetting higher profit and wider margins in Packaged Meats. The company maintained a fiscal 2026 outlook that calls for adjusted operating profit of $900 million to $1.0 billion, with its branded packaged-meat business expected to remain the principal earnings contributor.

For the 13 weeks ended September 27, sales fell 8.3% to $3.44 billion from $3.75 billion a year earlier. Adjusted operating profit declined 53.2% to $145 million, while the adjusted operating margin narrowed to 4.2% from 8.3%.

Adjusted net income attributable to Smithfield dropped 55.3% to $103 million, or $0.26 per diluted share, from $230 million, or $0.58 per share. On a GAAP basis, net income attributable to Smithfield was $89 million, or $0.23 per diluted share, compared with $248 million, or $0.63 per share, in the prior-year quarter.

The results reflected what Smithfield described as pressure from elevated input costs, compressed processor spreads, export conditions and a constrained consumer environment. Those factors were concentrated in Fresh Pork and Hog Production, while Packaged Meats continued to generate profit growth.

Packaged Meats offsets upstream weakness

Packaged Meats adjusted operating profit increased 1.9% to $230 million from $226 million, and the segment’s adjusted operating margin expanded to 11.6% from 10.8%. Sales declined 5.2% as a 5.3% reduction in price more than offset a 0.2% increase in volume.

Smithfield said the segment remains on track for a fifth consecutive year with operating profit above $1 billion. The company gained volume share in eight of its 10 product categories with more than $1 billion in sales, including all five of its largest categories. Share gains included 2.3 percentage points in smoked ham, 0.9 point in uncooked bacon, 0.8 point in packaged lunchmeat and 0.7 point in hot dogs.

Prime Fresh helped drive a 7% increase in Smithfield’s packaged lunchmeat volume, with the brand’s own volume rising 18%. Foodservice also remained an important channel, accounting for about 30% of Packaged Meats sales.

The company said its acquisition of Nathan’s Famous expands its Packaged Meats portfolio and gives Smithfield ownership of a brand it previously operated under a license scheduled to expire in March 2032. Management expects the transaction to support growth across retail and foodservice and to be immediately accretive.

Fresh Pork recorded an adjusted operating loss of $89 million, compared with a $10 million profit a year earlier. The segment’s adjusted margin fell to negative 4.9% from positive 0.5%, as sales decreased 17%, reflecting a 6.3% decline in volume and an 11.4% reduction in price. Smithfield attributed the loss to lower commodity markets.

Hog Production adjusted operating profit fell 61.3% to $34 million from $89 million, while its adjusted margin contracted to 5% from 10.9%. Sales declined 15% as lower joint-venture sales and market hog prices reduced results from the prior-year period.

Fiscal 2026 outlook and operating priorities

Smithfield expects fiscal 2026 sales to decline by a low-single-digit percentage from fiscal 2025. Its outlook includes adjusted operating profit of $900 million to $1.0 billion, including $1.09 billion to $1.14 billion from Packaged Meats. Fresh Pork is expected to generate between a $50 million adjusted operating loss and break-even results, while Hog Production is projected to range from a $25 million loss to a $25 million profit.

The company forecast capital expenditures of $350 million to $375 million and an effective tax rate of 22.5% to 24.5%. The outlook covers 53 weeks and includes the impact of the Nathan’s Famous acquisition, but excludes investment in the proposed Sioux Falls processing plant.

Management is also seeking to reduce annual internally produced hog volume to fewer than 10 million head, down from 11.1 million in 2025 and 17.6 million in 2019. An agreement with an existing joint-venture partner is expected to lower internal production by about 900,000 head annually, reducing Smithfield’s exposure to commodity markets.

Smithfield reported $3.5 billion of liquidity and a net-debt-to-adjusted-EBITDA ratio of 0.5 times at quarter-end. Its capital allocation priorities include product innovation, marketing, automation, operating efficiencies, complementary acquisitions and shareholder returns. Management anticipates a fiscal 2026 dividend of $1.25 per share, subject to board approval.

The company cautioned that its outlook remains exposed to commodity-price volatility, tariffs and other geopolitical risks, higher input costs, export conditions and reliance on third-party suppliers. Execution risks also include the planned reduction in internal hog production, integration and growth expectations for Nathan’s Famous, future capital requirements, cybersecurity threats, litigation and the company’s ability to achieve efficiencies across manufacturing and its supply chain.