Smithfield (SFD) Q3 2026 Earnings Call Transcript

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DATE

Tuesday, Oct. 27, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations - Julie MacMedan
• President and Chief Executive Officer - Shane Smith
• Chief Financial Officer - Mark Hall
• President of Packaged Meats - Steve France
• President of North America Pork - Donovan Owens

TAKEAWAYS

• Consolidated Sales -- $3.4 billion, decreasing 8.3% versus the prior year due to lower pork complex values.
• Adjusted Operating Profit -- $145 million, representing a 4.2% margin compared to $310 million and an 8.3% margin in the third quarter of 2025.
• Adjusted Diluted EPS -- $0.26 per share, down from $0.58 per share in the prior year quarter.
• Packaged Meats Sales -- $2 billion, a 5.2% decline as an 11.4% decrease in average selling prices offset 0.2% volume growth.
• Packaged Meats Operating Profit -- $230 million, increasing 1.9% year over year as margins expanded 80 basis points to 11.6%.
• Fresh Pork Sales -- $1.8 billion, dropping 17% reflecting lower pricing and a 6.3% decline in volume.
• Fresh Pork Operating Loss -- $89 million, compared to a profit of $10 million last year, driven by industry processing spreads falling 35% below last year.
• Hog Production Sales -- $691 million, decreasing 15% due to lower realized hog prices and reduced sales to joint venture partners.
• Hog Production Operating Profit -- $34 million, down from $89 million in the third quarter of 2025.
• Full-Year Sales Guidance -- Down low-single digits, revised from a previous expectation of roughly flat performance.
• Full-Year Adjusted Operating Profit Guidance -- $900 million to $1 billion for the total company.
• Packaged Meats Profit Outlook -- $1.09 billion to $1.14 billion for the full year, representing the fifth consecutive year above the $1 billion threshold.
• Fresh Pork Profit Outlook -- A loss of $50 million to breakeven for fiscal 2026.
• Hog Production Profit Outlook -- A loss of $25 million to a profit of $25 million for the full year.
• Capital Expenditures -- $350 million to $375 million planned for 2026, excluding the proposed Sioux Falls facility.
• Annual Dividend -- $1.25 per share, with three quarterly payments of $0.3125 per share already declared this year.
• Internal Hog Production -- Reducing by roughly 900,000 per year through a new long-term supply agreement with an existing joint venture partner.
• Liquidity -- $3.5 billion available at quarter end, including $1.2 billion in cash and cash equivalents.
• Net Debt to Adjusted EBITDA -- 0.5x, remaining well below the company policy limit of 2.0x.
• E-commerce Volume -- Growing 22.5% in the packaged meats segment versus industry growth of 13.4%.
• Operating Cash Flow -- $365 million generated in the first nine months of 2026, up $244 million from the same period last year.
• Prime Fresh Volume -- Increasing 17.9% for the packaged lunch meat brand, with first-time buyers growing by 7%.
• Food Service Innovation -- 22 new limited-time offers launched in the third quarter, bringing the year-to-date total to 53.

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RISKS

• Shane Smith stated, "U.S. consumers remain pressured due to persistent inflation and high gas prices, as well as reduced SNAP benefits, which has negatively impacted consumption levels."
• Shane Smith noted that "diesel and resin costs have been elevated since the Iran conflict began and even accelerated during the third quarter," increasing operational expenses.
• Shane Smith indicated that "there has been an erosion of export opportunities due to increasing pork supply in key markets such as Mexico and China, as well as ongoing tariffs."

SUMMARY

Smithfield Foods, Inc. (NASDAQ:SFD) reported a decline in consolidated sales and operating profit for the third quarter, citing significant margin compression in the pork value chain and softened domestic demand. Management reported that while the upstream fresh pork and hog production segments faced challenges from a global oversupply of pork and high input costs, the packaged meats segment achieved year-over-year profit and margin expansion. The company finalized the acquisition of Nathan's Famous on Oct. 26, 2026, and entered into a new supply agreement to reduce internal hog production by nearly one million head per year. Management lowered the full-year sales outlook to reflect persistent commodity market volatility but maintained its commitment to an annual dividend of $1.25 per share.

• The acquisition of Nathan's Famous secures long-term brand rights and includes the repatriation of approximately $33 million in annual license costs to the company's ledger.
• Management reported that the Sioux Falls processing plant project faces a delay following a court decision reversing a conditional use permit, though the company plans to reapply for necessary approvals.
• CEO Smith stated, "The deal [Nathan's Famous]... is immediately accretive to adjusted EPS, and we are building strong momentum in that brand."
• The packaged meats segment gained volume share in all five of its largest categories, including a 2.3 percentage point gain in smoked ham and a 0.9 percentage point gain in uncooked bacon.
• Donovan Owens noted that the industry cutout declined 35% year over year in the third quarter, with hams down 20% and bellies down 25%.
• The company launched a new marketing partnership between the Eckrich brand and the Big Ten College Sports Conference to engage an estimated 62 million fans and alumni.

INDUSTRY GLOSSARY

• Circana MULO+: A retail tracking data set that monitors sales across multiple outlets including grocery, drug, mass market, club, and dollar stores.
• Pork Complex: The collective market value of all various pork cuts and byproducts derived from a hog.
• Processing Spread: The margin between the cost of live hogs and the selling price of fresh pork products.
• SNAP: The Supplemental Nutrition Assistance Program, a federal program providing food-purchasing assistance for low-income individuals.
• USDA Cutout: A daily estimate of the value of a hog carcass based on the current prices paid for individual pork cuts like loins, hams, and bellies.
• Case-Ready: Meat products processed and packaged at a central facility to be placed directly into a retail display case without further preparation at the store.

Full Conference Call Transcript

Operator: Good day, and welcome to Smithfield Foods' third quarter 2026 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Julie MacMedan, Vice President of Investor Relations. Please go ahead.

Julie MacMedan: Thank you, operator, and good morning, everyone. Welcome to Smithfield's third quarter 2026 earnings call. Earlier this morning, we announced our results. A copy of the release, along with today's presentation, is available on our investor relations website. Today's presentation contains projections and other forward-looking statements that are being provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all comments reflecting our expectations, assumptions, or beliefs about future events or performance that do not relate solely to historical periods. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

These risks and uncertainties include, but are not limited to, the factors identified in the release in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our other filings with the Securities and Exchange Commission. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Please refer to our legal disclaimer on slide two of the presentation for additional information. Today's presentation will also include certain non-GAAP measures, including but not limited to adjusted operating profit and margin, adjusted net income, adjusted earnings per share, and adjusted EBITDA.

For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our slide presentation on our website. Finally, all references to retail volume and market share are based on Circana MULO+ data. With me this morning are Shane Smith, President and CEO; Mark Hall, CFO; Steve France, President of Packaged Meats; and Donovan Owens, President of North America Pork. During today's call, Shane will begin with high-level opening remarks. Mark will then review our third quarter financial results and full-year outlook, and Shane will return to discuss our growth strategies. Following our prepared remarks, all four executives will be available for the Q&A session.

I will now turn the discussion over to Shane. Shane?

Shane Smith: Thank you, Julie. Good morning, everyone. Today, we report a total company third-quarter adjusted operating profit of $145 million, which is within the range we provided in September, but down from $310 million in the prior year quarter. The decrease in the year-over-year performance was driven by a sharp decline in the pork value chain due to softer domestic demand and a global oversupply of pork. U.S. consumers remain pressured due to persistent inflation and high gas prices, as well as reduced SNAP benefits, which has negatively impacted consumption levels. At the same time, there has been an erosion of export opportunities due to increasing pork supply in key markets such as Mexico and China, as well as ongoing tariffs.

This has resulted in a rapid deterioration in the pork value chain. Additionally, transportation costs remain high due to carrier supply constraints, while diesel and resin costs have been elevated since the Iran conflict began and even accelerated during the third quarter. While these commodity market-driven challenges primarily impacted our upstream fresh pork and hog production segments, which reset our full-year outlook, our packaged meat segment demonstrated its resilience with year-over-year volume, profit, and margin expansion. In the face of these market challenges, I want to highlight progress on multiple strategies as well as our strong financial position.

First, we increased volume and operating profit in packaged meats, and this segment is on track to deliver its fifth consecutive year of above $1 billion in operating profit. Second, we completed the acquisition of Nathan's Famous, bolstering our packaged meats portfolio, expanding our opportunities to grow this brand domestically and internationally. Third, while our upstream segments remain challenged, we entered into a new long-term supply agreement with an existing joint venture partner, which will reduce the number of hogs that we produce internally by roughly 900,000 per year. Fourth, we have a strong balance sheet and financial position that provides significant financial flexibility to support growth and create shareholder value.

Fifth, we are on track to return value to shareholders through an anticipated annual dividend of $1.25 in fiscal 2026. With that, I will turn it over to Mark to review our financials in more detail. Mark?

Mark Hall: Thanks, Shane, and good morning to everyone joining the call. Turning now to our third quarter results. Consolidated sales in the third quarter were $3.4 billion, which was an 8.3% decrease compared to the prior year, reflecting lower pork complex values as Shane discussed. We delivered adjusted operating profit of $145 million at a 4.2% margin, which compared to $310 million and an 8.3% margin in the third quarter of 2025. Adjusted net income was $103 million, compared to $230 million in the third quarter of 2025, and adjusted diluted EPS was $0.26 per share, compared to $0.58 per share in the third quarter of 2025. Our consolidated results reflect very different dynamics across the portfolio.

Packaged meats grew volume, profit, and margin, while weaker pork and hog values weighed on our upstream businesses. Now I'll walk through those drivers, starting with packaged meats. Packaged meats sales were $2 billion, down 5.2%, as a 5.3% decline in average sales price more than offset 0.2% volume growth. The lower average sales price primarily reflected lower pork complex values, partially offset by favorable mix. Operating profit increased $4 million-$230 million, and margin expanded 80 basis points to 11.6%. The year-over-year improvement reflected disciplined pricing, lower raw material costs, volume growth, and favorable mix. These benefits more than offset higher inflationary input costs and increased marketing investment.

All in, packaged meats delivered its second highest third quarter operating profit on record, demonstrating the earnings resilience of the segment in a challenging consumer environment. Turning to fresh pork. Sales were $1.8 billion, down 17% year-over-year, reflecting an 11.4% decrease in average selling price and a 6.3% decline in volume. The segment reported an operating loss of $89 million, compared with an operating profit of $10 million in the third quarter of 2025. Market conditions weakened further from the second quarter, putting pressure on both our processing spread and the margins we realize across our sales channels. On a sequential basis, the industry processing spread narrowed approximately 28%, and it was down approximately 35% below last year.

This is well below the level needed to cover processing costs. Additionally, increased global pork availability created a more competitive environment for U.S. pork exports, particularly in Mexico and Asia, which adversely impacted volume and sales margins. Turning to hog production. Weaker pork values also flowed through to hog prices. This pressured hog production profitability at the same time fresh pork faced narrower processing spreads. Sales of $691 million decreased $122 million or 15% versus the third quarter of last year. This was driven primarily by $74 million in lower sales to joint venture partners and a 5.2% decline in average selling price, inclusive of the effects of hedging.

Operating profit was $34 million compared with $89 million in the prior year quarter, reflecting lower realized hog prices and lower sales to joint venture partners. Although current commodity conditions are masking some of the benefit, the structural improvements we've made on our retained farms have strengthened the business and improved performance across the cycle. Taken together, packaged meats profit growth was not enough to offset the pressure in fresh pork and hog production, which drove the consolidated results lower. This brings me to the balance sheet and cash flow. We continue to generate strong cash flow while maintaining a very healthy financial position.

At the end of the third quarter, our net debt to adjusted EBITDA ratio was 0.5x, well below our policy of less than 2x. We also ended the quarter with very strong liquidity of $3.5 billion, including $1.2 billion in cash and cash equivalents, comfortably above our $1 billion policy threshold. On a trailing 12-month basis, operating cash flow was $1.3 billion. We generated $365 million of operating cash flow in the first nine months of 2026, up $244 million from the same period last year, with our seasonally strongest fourth quarter ahead of us.

That cash generation gives us the flexibility to continue funding our growth priorities, invest in the business, and return capital to shareholders while maintaining a strong financial position. Capital expenditures for the first nine months of 2026 were $281 million, including $37 million related to the proposed new Sioux Falls facility. We now expect to spend between $350 million-$375 million in capital expenditures in 2026, excluding Sioux Falls, with more than half of our planned capital investments focused on projects designed to support both top and bottom-line growth. At the same time, we continue to return capital to shareholders. To date, we have declared three dividends this year, and we anticipate paying $1.25 per share in annual dividends.

Our dividend remains a core component of our capital allocation strategy. Turning now to our outlook. We are updating our total company sales outlook to down low single digits versus our prior expectation of roughly flat, primarily reflecting lower pork complex values. For hog production, our full-year range of a loss of $25 million to a profit of $25 million primarily reflects lower hog prices in the fourth quarter. For Fresh Pork, our full-year range of a loss of $50 million to breakeven reflects continued pressure on product values, processing spreads, and channel profitability in the fourth quarter. Our packaged meats outlook reflects strong performance in a tough environment, underscoring the resilience of this business.

We have narrowed our full-year packaged meats operating profit outlook to a range of $1.09 billion-$1.14 billion, with a modest increase at the midpoint, primarily reflecting two months of Nathan's Famous results. As previously reported, our outlook includes a 53rd week of results. At the same time, we expect continued softer global demand for pork, which will continue to pressure our upstream segments. For total company operating profit, we are expecting to report a full-year adjusted range of $900 million-$1 billion. The reset in our total company outlook is driven by fresh pork and hog production.

Importantly, this updated outlook does not change how we view the strength of our brands, the direction of our strategy, or the long-term earnings power of the business, nor does it change our capital allocation framework. We will continue to reinvest in the business, support a reliable and sustainable dividend, evaluate disciplined, synergistic M&A, and maintain a balance sheet of strength. With that, I will turn the call back to Shane for a closer look at our businesses and growth strategy.

Shane Smith: Thanks, Mark. While we are navigating a more challenging operating environment in the near term, our five foundational growth strategies remain unchanged. Increase our packaged meats profitability, maximize the net realizable value in fresh pork, reduce internal hog production, and drive a best-in-class cost structure on our retained farms, continue to optimize our operations, and to evaluate synergistic M&A. Looking closer at the dynamics within each segment, I will begin with fresh pork since that is where we see the most near-term pressure to profitability. Despite challenging market dynamics, we remain focused on providing a consistent supply of high-quality fresh pork to our packaged meats segment and our external customers.

One of our primary focus areas for 2026 has been to grow volume in the retail channel, emphasizing higher-margin, value-added, case-ready and marinated offerings. During the third quarter, we grew marinated pork volumes 2.6% and gained 2.9 points of market share. We are innovating in this category with items such as our meal-ready cuts launched earlier this year. Consistent with our strategy, we remain focused on optimizing the net realizable value of each hog, as well as maintaining operational discipline to achieve cost savings. Turning to hog production, we feel good about the investments and operational improvements we have made over the past several years to materially improve the cost structure of the hogs we produce on our retained farms.

Our teams remain focused on improving operating results as we move forward. We also continue to focus on our hog production optimization strategy. As I mentioned earlier, we are pleased to announce a new long-term supply agreement with an existing joint venture partner, which will reduce the number of hogs internally produced by approximately 900,000. We continue to evaluate the optimal degree of integration plant by plant based on external hog availability, supply assurance, and economic returns. This strategy will not eliminate commodity volatility, but it reduces capital and earnings exposure and improves the durability of our integrated model across the cycle.

Looking ahead for our fresh pork and hog production segments, our focus remains on what we can control, maximizing whole hog value, growing higher-margin channels, executing our next best sell strategy, reducing the number of internally produced hogs, and maintaining a best-in-class cost structure. Shifting gears to our packaged meats segment, our third quarter results provide clear evidence that our strategy is working. We gained volume, unit, and dollar share while protecting profitability, and we did so in a market where consumers remain selective. Taking a closer look at the strong third quarter execution by packaged meats, that positions us well as we enter the seasonally strongest fourth quarter.

Across our top 25 categories, industry volume declined 3.3%, while we grew volume by nearly 1%. We were the only company in our core competitive set to grow volume in this quarter, driving 0.4 points increase in volume share. Most importantly, we gained volume share in each of our five largest categories. Smoked ham was up 2.3 points, uncooked bacon was up 0.9 points, packaged lunch meat was up 0.8 points, hot dogs up 0.7 points, and cooked dinner sausage up 0.2 points. In Q2, we defended share in a difficult retail environment. In Q3, we took share in our largest and most strategically important categories.

Consumers remain selective and value-conscious, and we are using the breadth of our portfolio and commercial capabilities to deliver value to them. We offer trusted brands and private label products across a range of price points, giving us multiple ways to compete while maintaining discipline around profitability. We also remain disciplined in how we deploy promotional investment. As you've heard us say consistently over the past year, our preferred approach is to pair compelling consumer value with strong retail execution that increases visibility and drives conversion with a focus on quality merchandising. That remained the primary driver of our promoted volume in the third quarter.

In addition to in-store investment, e-commerce is a fast-growing and important promotional channel for us, and we are taking share. During the third quarter, we grew our e-commerce volume 22.5% against the industry growth of 13.4%. As we look ahead, we continue to view e-commerce investment as a core momentum driver for packaged meats. We are pleased with the efficiency and the effectiveness of our omni-channel execution this quarter. Our ability to maintain discipline around promotional profitability is underscored by the fact that third quarter packaged meats segment profit margins expanded by 80 basis points year-over-year. Strengthening omni-channel execution is one lever within a much broader packaged meats playbook.

We are also expanding distribution, investing in our brands, and bringing differentiated innovation to market. Our ability to deploy these levers by category and customer while maintaining pricing and profitability discipline is what gives us confidence in our ability to sustain volume and share growth over time. During the third quarter, packaged meats profitability benefited from our strategy to increase the mix of higher-margin items, such as Prime Fresh packaged lunch meat, which is a premium, convenient, deli-quality offering that continues to be one of our fastest-growing brands. We grew volume by 17.9% with volume velocity of 12%. Repeat purchase is building. First-time buyers increased 7%, and repeat buyers increased 17.6%.

We have ample runway ahead for Prime Fresh as we continue to add new stores and increase our penetration per store. We also continue to innovate our Prime Fresh portfolio, including expanding our proteins beyond pork. One of our best-selling new launches for Prime Fresh this year has been rotisserie chicken, which expands our Prime Fresh poultry offerings. That brings me to innovation and how we bring products to market. This is where our brand strategy is evolving the most and how we are building the next generation of Smithfield consumers. One of our core innovation pillars is flavor. Today's consumers are demanding more variety and flavor offerings than ever before, and we have responded.

In 2026, we have launched a succession of new products featuring bold flavor. For the Smithfield brand alone, we have introduced three new premium bacon flavors under our Smokehouse Reserve label, three new brat flavors, and just in time for the holidays, cranberry brown sugar glazed spiral hams. The sales momentum continues for premium Nathan's Grass-Fed Hot Dogs, which we launched last quarter. Now that we have closed the acquisition, we are excited about the opportunity to accelerate innovation within the Nathan's brand, and we look forward to sharing more on that in future calls. This year, we have increased our brand investment, focusing on our three national brands, Smithfield, Eckrich, and Nathan's.

In August, we kicked off our new Eckrich marketing partnership with the Big Ten College Sports Conference. Partnering with the Big Ten extends our reach beyond the seasonal college football playoffs into multiple collegiate sports, strengthening our year-round presence with customers and consumers. The Big Ten represents more than 62 million fans and alumni who have an estimated $5.7 trillion in buying power. We will activate a new Eckrich campaign, A House United. This is an omni-sport platform creating meaningful brand equity across our customers, consumers, and our communities. As a leading packaged meats and fresh pork producer in the U.S. with a 90-year history, we believe in educating consumers about the benefits of eating pork.

Pork is well-positioned for today's consumer spending environment, especially with the relatively high cost of beef. Whether as a substitute for ground beef, elevating taco nights, or being the best part of breakfast, pork is very well-positioned for today's protein-focused consumer without the strain on consumers' wallets relative to other proteins. Our We Speak Pork campaign is highlighting these benefits and is introducing Smithfield as a modern, culturally relevant brand for the next generation of consumers. The campaign's distinctive creative is increasing awareness, driving engagement, and helping attract younger households to both our brand and the pork category. Early results give us confidence that strong brand building can simultaneously enhance relevance today while supporting sustainable household penetration growth over time.

Food service is also an important channel for packaged meats at roughly 30% of our sales. In today's economy, many food service providers are under pressure, and we are a trusted partner that provides solutions which save them time and money, such as our roasted bacon. We also help them drive traffic through innovative limited-time offers. During the third quarter, we delivered 22 new limited-time offers, bringing us to 53 year-to-date. As we look to the fourth quarter of 2026 and longer term, we feel good about our packaged meats momentum and our market strategies. We are gaining volume, unit, and dollar share through increased distribution, successful omni-channel marketing, and continuous product innovation.

A key competitive advantage in today's environment is our culture of continuous improvement. During the third quarter, inflationary headwinds persisted, but we were able to partially mitigate that through operational efficiency. In manufacturing, we continue to adapt to market conditions by simplifying, rationalizing, and improving our procurement practices. The consistent capital investments we have been making are generating solid returns, and we are continuing to invest for the long term. This includes our proposed groundbreaking new Sioux Falls processing plant. This plant will be the most modern, efficient, and largest combined fresh pork and packaged meats processing plant in our network and will deliver a step change in operating efficiency.

Finally, we continue to evaluate opportunistic M&A to support our growth strategies. Yesterday, we closed the Nathan's Famous acquisition, securing our rights to this iconic brand into perpetuity. The acquisition is also immediately accretive to adjusted earnings per share, and we are excited about the opportunity to maximize Nathan's Famous brand growth. At retail, we will accelerate our innovation pipeline, building on successful launches such as grass-fed beef hot dogs and Enrobed items. In food service, we will optimize brand sales through direct management. We are looking forward to sharing more about the Nathan's Famous brand on future calls. In closing, across the company, our teams are focused on executing our strategies. Packaged meats remains resilient.

In our upstream segments, we are focused on reducing market risk by lowering the number of hogs internally produced and by optimizing our fresh pork operations. We are well-positioned to navigate today's environment, protecting packaged meats profitability, reducing controllable costs, and executing on our updated 2026 outlook. Beyond the near term, our confidence in Smithfield's long-term value creation model is unchanged. The strength of our balance sheet, liquidity, and cash generation allows us to continue investing in our strategy, reinforce the business, and return capital to shareholders consistent with our capital allocation priorities. Now, I'll ask the operator to open the call for Q&A. Operator?

Operator: We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Leah Jordan with Goldman Sachs. Please go ahead. I am sorry. I just put Max Gumport on the queue in the podium. I am so sorry. So our first question is Max Gumport with BNP Paribas. Please go ahead.

Max Gumport: Hey, thanks for the question. First, I am just curious on the demand softness for packaged meats. You called out some financial pressure that a consumer is feeling. But I am curious if your work is also pointing to any change in consumer preferences or also have you looked into potential impacts from GLP-1 drugs on the consumer and how they are changing their consumption patterns? Thanks very much.

Steve France: Morning, Max. This is Steve, so I will take that question. So I would say first off, from a consumer standpoint, I would say the consumer is still pretty cautious. They are still spending, but they are definitely focused on finding a value which is not just a low price, and that is something that we have discussed on our previous calls, that value is not just a low price. Now, although the industry volume was down, as Shane mentioned, 3.3% in Q3, consumers are not walking away from buying. They are being a lot more selective really about what they put into their basket.

Now, with the solid results that we delivered in Q3 by growing our volume share, profit margin, and operating profit, we feel really good about how we are positioned with our extensive portfolio. So we do not have to win with just one price point. We can really give that consumer choices depending on what they are looking for and also, of course, what they can afford. Now, I would say that the strength of our portfolio is obviously showing up in our results.

In Q3, we are the only manufacturer in our competitive set to grow our volume almost 1% in our key categories, and we grew our volume share by over 40 basis points, which was more than any other manufacturer. We also continue to win with the consumer, which is why we saw increases in first-time buyers, repeat buyers, and also households buying our products. The other thing that I would add, and it kind of goes to your question about GLP-1s, is that going out to eat has gotten expensive, so preparing a meal is pretty compelling.

But those meals that they're preparing at home, they continue to have protein in those meals, and it really fits perfectly with our product offering. So not only on the retail side of the business, but also on the food service side and the industrial side of the business, where our protein is really a component in meals that consumers are buying. So overall, I'd say the consumer's cautious and they're still looking for value, but they're being selective, and they're still buying our products.

So at the end of the day, our job is to make sure that we're giving them the right products at the right price and really giving them a reason to put our products into their baskets.

Max Gumport: Okay. Very helpful. And I realize the profit shortfall this year, it's really driven by the upstream segments, which in turn is driven by the commodity markets, which is very much outside of your control. Obviously, though, you're expecting this pressure to linger into 4Q, given what we're seeing in the market. You also did, though, express the view that your long-term view of the earnings power of your business hasn't changed. So I guess I'm just curious, one, do you have a view on if this pressure can linger into and beyond 4Q into 2027? And then what is your view of the long-term earnings power of this business, if you could quantify it? Thanks very much.

Shane Smith: Max, are you speaking specifically to the long-term earning power of the Packaged Meats segment?

Max Gumport: Total company, and definitely bucketing the upstream segments in there too, given they are experiencing the pressure from these commodity markets.

Shane Smith: Max, I would tell you that undoubtedly, without question, we are seeing pressure on the upstream businesses. As we look out, we see that this pressure is very broad-based. In the U.S., we know that demand is down with consumers being stretched the way they are. Then you look globally and you also see that some key export markets remain really challenged right now. When we look at this current market, this challenging market that we're in right now, the duration of that is really uncertain. But some of the things we're doing, the strategies that we're employing as a company across all three segments, are really the same strategies that we've talked about since we did the IPO.

I believe that's really set us up to weather any challenges better today than we've been able to in the past. Steve just touched on some of this, but first, we're leading with growing profitability in our packaged meats business. That business is on track for a fifth consecutive quarter of earnings that are above $1 billion. In this environment, whether we're talking about volume growth, volume share growth and profitability and expanded margins, these guys are doing a really great job of adding value to the overall company.

In fresh pork, again, that's where we see some of the pressure, but we'll continue to execute the strategies that we've talked about historically, and that's really around optimizing that net realizable of value of every hog that we bring in. We've seen some good success in that outside of some of the spread compression that we've seen. We've seen higher margins come in our value-added marinated, whether that's case-ready. We've seen growth in food service, and we've also seen growth in our e-commerce channels. The fresh pork business, while it is under some pressure right now, is really performing well.

Then in hog production, we're continuing to execute that strategy of reducing the hogs that we grow internally and replacing those with external hogs. The announcement that we made this morning was a big announcement. That takes another 900,000 hogs out of our current operation and puts it into an independent operation. Again, getting down below that 10 million hogs has been a big goal of ours, and I'm happy to say that we've achieved that. But what's important there as well, the hogs that we're left with that remain on our farms, our internal production, those cost structures are just getting better and better.

I would tell you, as a company, the earnings power of the company, that we're better positioned today than we have been historically, and I would say relative to our competition. The management team that we have, I think they have proven their ability to execute through markets like we're seeing today. Then what we're seeing in packaged meats as Steve and his team have set us up as we go into 2027, it's just a resilient business and we're making some really great strides in optimizing the total company. So I feel good about the direction we're heading, Max, and really optimistic about the future.

Max Gumport: Okay, thanks very much. I appreciate all the color and I'll pass it on.

Operator: Next question is from Leah Jordan with Goldman Sachs. Please go ahead.

Leah Jordan: Thank you. Good morning. Thank you for the update today. Maybe just starting off where you left off there, Shane, around the resiliency of packaged meats. A big driver of this into next year could be the potential margin recovery there that we started to see this quarter. Just any more color and detail you can provide on your outlook on the potential margin recovery in packaged meats as we look ahead. How do we think about the trade-offs between lower pork input versus the other inflationary pressures like freight you highlighted?

Then I think ultimately the question is: how do you think about potentially reinvesting some of that lower input cost on the pork side into things like promotions with the consumer still pressured here?

Shane Smith: Okay. Thank you, Leah. That's a great question. Steve, why don't you start off with that and I'll jump in at the end.

Steve France: Morning, Leah. I appreciate the question. As far as what we think about from a packaged meat standpoint, I think the number one thing to really consider is that over time, we've really built this business to handle volatility. I would say in today's environment, we're dealing with high transportation costs, extremely high diesel, and also increased packaging costs due to resin. From a commodity standpoint, raw material markets will always move around and the consumer behaviors obviously are going to change like we've been seeing the past couple of years. At the end of the day, our job is to keep moving the business forward regardless of what environment that we're faced with.

For us, that really starts with continuing to shift the portfolio, like we've talked about several times, towards more value-added, higher margin products while reducing our reliance on more commodity-oriented categories. At the same time, we continue to invest behind our brands and innovation pipeline, so we're really staying relevant with our consumers, and you can see the results that we've delivered over the last almost couple of years at this point. Finally, we really continue to focus on productivity. Whether that's from an operations standpoint or how we're approaching the business with our customers, that along with efficiency and cost savings.

When we do that, it really helps us protect the margins and minimize the amount of pricing we need to take, and it really continues to provide us the opportunity to invest in our brands and also focus on growth opportunities without sacrificing any type of profitability. The result of this is really, you can see it in what we delivered in Q3. As I mentioned earlier, we were able to grow our volume share, profit and profit margin in Q3 despite some of these headwinds and the current environment that we're dealing with. We really expect that to continue based on the groundwork and the business that we have laid so far this year.

Shane Smith: The only thing I would add there, Leah, is I really like the balance of our portfolio and where it is right now. The consumers, whether they're looking for a premium product or whether it's a value product or even into private label, we have something that keeps them overall in our Smithfield family. I think that's an advantage in this environment that we see today, where we know that consumers are continuing to move up and down and around the value spectrum. Going forward, as I've mentioned earlier, our focus really hasn't changed. We're going to continue to build the packaged meats business through innovation. We're gaining points of distribution. We've increased our marketing support.

Then looking at that greater mix of how we continue to change our mix to that higher margin value-added product. I personally think there is still a lot of opportunity ahead of us. I think the progress that we have seen in the third quarter and that we expect to see going out through this year, it gives me a tremendous amount of confidence that where this business is headed.

Mark Hall: Leah, it is Mark. I would just add that closing the Nathan's deal, it really secures our long-term rights to that brand. The license would have expired in 2032, and it really bolsters our packaged meats portfolio. We have the opportunity now to grow that brand, new opportunities in food service, and it really furthers our protein diversification. The deal, as we noted, is immediately accretive to adjusted EPS, and we are building strong momentum in that brand, as Shane mentioned, with the premium Nathan's Grass-Fed Hot Dogs, which we launched in the second quarter. So a lot of excitement behind welcoming the Nathan's brand to our portfolio.

Leah Jordan: That was great color. Thank you all. Then maybe for a follow-up just on hog production, as futures are implying continued pressure for that segment into next year, just any color there on your visibility for both hogs and feed and has the current environment changed your hedging strategy at all?

Shane Smith: Yeah. So, we see the strip too, Leah, and we do see what looks to be pressure out in hog production. But we also see some things in some of the public reports, whether that is hog inventories. I think in the September report were called down about 1.6%. We see farrowing intentions down. I would just caution that when we look at the strip, typically this time of year when we are looking at the future strip, it typically implies a loss. So we are monitoring it closely. From a feed perspective, corn seems to be in a good place right now. The ending stocks were, I think in the October report, about 282 million.

They increased 282 million to about 1.8 billion. So I think raising costs will be moderate next year, probably comparative to 2026. But it is something we are watching, as you know, every day. From a hedging perspective, we don't necessarily talk about how we're positioned other than to say that's one tool that we use, whether it's purchasing corn and soybean meal or selling hogs on the futures markets. But we think we're appropriately positioned.

Leah Jordan: Great. Thank you. I'll pass it on.

Operator: The next question is from Ben Theurer with Barclays. Please go ahead.

Ben Theurer: Yeah, good morning, and thanks for taking my question. Just picking up on some of the commentary, just around Packaged Meats and Nathan's. So as we look shorter term into the fourth quarter, within the range for Packaged Meats in particular, can you help us quantify what's kind of implied for, A, the 53rd week and then, B, the Nathan's accretion into this? Because you said it's going to be immediately accretive, so just that we can kind of frame what the two months of Nathan's means. So that would be my first question.

Shane Smith: Yeah. Mark?

Mark Hall: Sure. Ben, thanks for the question. We are heading into what is seasonally the strongest quarter for packaged meats because it does include the Thanksgiving and Christmas holidays. As you alluded to, it does include the 53rd week. I would caution you that 53rd week is post-holiday, so it is really not equal to a normal week in the fourth quarter. The Nathan's pickup is going to be approximately two months of earnings, so it is immediately accretive, but I would say it is somewhat de minimis as we close the year, and it is not prime hot dog season. We are continuing to see increased distribution that we earned earlier in the year.

The outlook for the fourth quarter is very strong. We should have the tailwind of lower raw material costs, which will maintain pricing and profitability. We do still see those consumer headwinds and persistent inflation in freight, diesel, and resin. Those are mitigating factors, but again, looking at a very strong fourth quarter for the packaged meats business.

Ben Theurer: Okay. As for Nathan's, you have talked about it would have been a license running out. Now you own the brand. There are a lot of opportunities. Maybe as you think about the, A, integration priorities and how we should think about the contribution into 2027, what are the things that you can immediately lever? On the other side, I know there is a little bit of a food service business attached to it. Maybe if you update us what your thoughts are around the Nathan's food service business as we move into 2027.

Steve France: Morning, Ben. This is Steve. I'll take that question. First off, I would say that obviously we're very excited that we finally have Nathan's part of the Smithfield family. When you think about the history that we have with this brand, we've known it for a very long time. We've been making the product and we've been selling the product on the retail side of the business. To your point, the difference with food service, and I'll talk about that here in a minute.

When you think about owning the brand, one of the things that this does for us is it really provides us a lot more flexibility than we had under the current or the previous licensing agreement that we had. We can make decisions quicker and we can also make longer term decisions for the brands and we can also move faster when we see opportunities. On the food service side, that's one area that we're very excited about. Historically, we manufactured the product for the food service side of the business, but we did not control the commercial side of that business, and we do now.

We'll be bringing the sales responsibility in-house and the benefit that we have is we have our direct sales force that have the relationships, and they've identified opportunities since we announced the opportunity to buy Nathan's. They've been canvassing the market to understand where do we see opportunities to grow that brand. We see it as a big opportunity as we move down the road. Beyond that, I won't get into a lot of details or specifics, but we spent a lot of time really looking at this business. The reality is, we would not have made this investment if we didn't believe that there was substantial room to grow the business.

The bottom line is we're thrilled to own the brand and we see a lot of opportunity not only on the retail side of the business, but also on the food service side of the business.

Ben Theurer: Perfect. Thank you very much. I'll pass it on.

Operator: The next question is from Heather Jones with Heather Jones Research. Please go ahead.

Heather Jones: Good morning. Thanks for the question.

Shane Smith: Hey, thanks.

Heather Jones: Hi. I wanted to ask a question on the fresh pork segment. The sequential deterioration was a little more than I would have thought given industry trends, but I did notice that your volumes were down over 6% year-over-year, and I think industry weights on average were higher year-over-year, so maybe heads down even more than 6%. That is very different from the volume trends for the industry as a whole. Just wondering, did you all have more pronounced disease issues that affected your operations during the quarter? If so, how are those tracking heading into Q4 and as we think about 2027?

Shane Smith: Yeah. Heather, what I would tell you is, and we've talked about this previously, we've gone through a process where internally we're optimizing our business across all three segments. That optimization has been really to define what do we need internally to support our packaged meats business. That optimization includes, again, all the way back down through the upstream businesses to hog production. You're correct. Our volumes in fresh pork are down 6%, but I would tell you that's more a result of overall optimization.

Heather Jones: Okay. So there's no disease issues and all that we need to be thinking about heading into Q4 or 2027?

Shane Smith: I would say nothing abnormal.

Heather Jones: Okay. On Nathan's, just wondering if you all could give us some color. So you all have been producing and selling at retail for many years, like you said. I want to say their annualized sales run right around $160 million-$165 million. But how should we be thinking about the incremental contribution to Smithfield from a sales and EBIT perspective? Because it seems like it's a pretty high margin business. Just if you could give us any quantifying around that.

Mark Hall: Yeah. The sales accretion will really come from, as Steve mentioned, the food service side of the business where we didn't participate as holistically as we do on the retail side. But the immediate benefit, and you can go back to Nathan's prior disclosures, there's about $33 million a year in license costs that effectively we're going to be repatriating to our side of the ledger. So that's the basis for the immediate step-up in earnings related to the Nathan's business. But again, we believe there's a lot of untapped potential to grow that business, both in retail and food service adjacent categories and we'll have some exciting news to share when we release our year-end results.

Heather Jones: Okay. Thank you so much.

Operator: The next question is from Pooran Sharma with Stephens Inc. Please go ahead.

Pooran Sharma: Good morning, and thanks for the question here. I wanted to ask about something you kind of alluded to earlier. You mentioned the duration of a challenging market is uncertain. I certainly respect that, but just thinking about seasonal trends here, do you think that the springtime can be a period that can offer a little bit of relief for your upstream businesses. Maybe on the fact that, typically, around this time, the supplies are seasonally lower. And I think around this time, you'd get buyers maybe more willing to load up inventories ahead of spring or summer programs. Is that a fair assessment to think about, or is it still too early to tell?

Donovan Owens: Yeah, Pooran. Hi, this is Donovan. Good question. Thank you for the question. I do think your last comment's probably the most accurate, which is, it's really too early to tell about spring of 2027 from an upstream perspective. We are going through some pretty significant devaluation in our products right now. You looked at the USDA cut out. As Shane pointed out earlier, the cutout's down 35% year-over-year in Q3. That's not something we significantly usually see. Of that, hams are down 20% and bellies are down 25%. We need to see exactly how bellies and hams trend over this holiday period.

Q4 is going to be critically important for the valuation to change on the front end of the business. And we need to see exactly how our holiday season runs before we can really look at the spring of 2027.

Pooran Sharma: Okay. Appreciate the color there. And just on the follow-up, just on the Sioux Falls facility, following a recent court decision reversing the conditional use permit, just wanted to get a sense if you're still expecting construction to begin within the first half of 2027 and production by the end of 2028, or should we assume that there's some delay to that?

Shane Smith: Yeah, Pooran, the recent setback we saw in Sioux Falls, it doesn't change our commitment to build the Sioux Falls plant, and we'll update the market timing once those approvals become more clear. But we do plan to reapply for the conditional use permit. And as always, we'll continue to comply with all the regulatory requirements, especially for a project like this, which represents such a major investment. But we'll wait till a little later till we have a little more clarity around the timing of that.

Pooran Sharma: Okay. Appreciate the color.

Operator: We have time for one more question. Our last question comes from Peter Galbo with Bank of America. Please go ahead.

Peter Galbo: Hey, good morning. Thanks for taking the questions. Just maybe two clarifications on the hog production business. One, Shane, the 900,000 decrease, just can you give us a sense of timing? Is that a January 1st start, and so we should kind of be starting to flow that in the very beginning of next year? Is there a delayed start? So just any detail there. The second piece on hog production, I think there was actually an increase in the number of hogs sold this quarter year-on-year, which again, as you're trying to work down that number closer to the 10 million, just want to understand what drove that. Then I'll have a very quick follow-up. Thanks.

Shane Smith: Yeah. On the 900,000 hogs, Peter, will be taken out. That'll be signed pretty quickly, and then it'll come out really, I'm expecting it to be out for the numbers for next year. As to the head sold increase, we had some productivity improvements. As everyone on the call knows, we've had some initiatives in place to improve our genetic profile and health initiatives and a number of other things, and those things paid off some this year, as we saw some of that benefit come through in increased productivity.

Peter Galbo: Okay, great. Thanks for that. As a follow-up, Shane, I know on fresh pork, and I think this is probably part of the prior question, but just can you kind of give us parameters? We're maybe in a little bit of unchartered territory again, given the export situation and what's happening. But just how quickly does it take to course correct that business, just from a market standpoint historically? Are we looking at a couple of quarters and historically and things would correct such that profitability in that business snaps back? Just any sort of guardrails you can put around it, I think as people are trying to frame out the more volatile businesses for 2027. Thanks very much.

Shane Smith: Donovan, you want to talk to the exports question?

Donovan Owens: Yes, thanks, Peter. You're looking for some guidance as to how long the strip or how long the downward pressure can continue. I would tell you that, just as I answered earlier, we've been in a prolonged situation here. This is unusual. Certainly, we haven't seen this type of prolonged downturn in fresh pork values over the last three years. We are in a little bit of unchartered territory as it really pertains to coming out of COVID. Since COVID, this really would be a different time period for us. I'll tell you that, just as I answered the last question, we're going to have to see how Q4 responds. We have had unseasonal pressure in Q3, unseasonal downturn.

As you can see, when we're talking about some of the valuation decline in bellies and hams, it's pretty significant. That's something that we have not seen, and we got to hit the bottom, so to speak. I do think we're going to see that here shortly with hog prices where they're at. I do have us really seeing some benefit as we end up Q4. Then I think as we start 2027, from a fresh pork perspective, albeit there is supply issues across the globe. Mentioning some of the stats, you got global production up 0.7%. We've got Mexico up anywhere from 3%-5%. We've got total global protein production up 1%, but pork is not one of those.

That's the interesting dynamics that we're in right now, Peter. I would tell you that I do believe pork is resilient. I do think our business model itself is even better than that, and I do think that we'll see fresh pork rebound before we end the year. Typically, December is our strongest month, and I have no reason to believe it won't be this year.

Peter Galbo: Great. Thanks very much.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to President and CEO, Shane Smith, for closing remarks.

Shane Smith: Thank you everyone for joining us. Packaged meats continues to demonstrate its resilience, supported by strong brands, share gains, and disciplined execution. In our upstream businesses, our teams are focused on the actions within our control while navigating difficult pork market conditions. Our balance sheet remains strong, and we will continue to invest in the business, execute our strategy, and create long-term value for our shareholders. We look forward to updating you on our progress when we report our fourth quarter and full-year results. Thank you all.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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