Zhongpin Inc. (NASDAQ:HOGS) recently reported first quarter results and grew revenue by 32.8% even as hog and pork prices fell 10%.

Zhongpin is a Chinese meat and food processing company specializing in pork and pork products, vegetables and fruits.

It operates 3,000 retail outlets and distributes in 20 Chinese provinces plus Beijing, Shanghai, Tianjin and Chongquing. The company also exports to the European Union and Southeast Asia.

As the Chinese economy grows, so does demand for pork and pork products by an expanding middle class. Zhongpin has been able to tap into that demand by expanding production and growing its presence as a regional brand, and now, increasingly, as a national pork brand.

On May 7, Zhongpin surprised on the Zacks Consensus Estimate for the first quarter by 11.8%. The company has had a spotty track record, however, of beating the estimate in the last year, surprising just 2 out of the last 4 quarters.

Earnings per share were 38 cents compared to 33 cents in the year ago period.

Pork and hog prices fell 10% in the first quarter compared to the fourth quarter of 2009 as an outbreak of foot and mouth disease in south China affected the hog industry.

Zhongpin doesn’t source hogs from south China but the outbreak impacted demand which resulted in an oversupply of hogs. Now that the scare has passed, the company expects prices to recover in the near future.

Revenue jumped by $50.5 million to $204.3 million from a year ago as volumes increased despite the lower pork prices. All segments saw volume growth. Pork products made up 98.6% of total revenue with fruits and vegetables making up the remainder.

Full Year Outlook Maintained

Despite the better-than-expected first quarter, and an outlook for 2010 that remains “encouraging”, Zhongpin is playing it cautious and maintained its full year guidance.

Revenue is expected in the range of $900 to $940 million with earnings per share between $1.49 and $1.64.

Analysts are more bullish than the company as 2 estimates have been revised higher in the last 7 days which has bumped the 2010 Zacks Consensus Estimate to $1.65 from $1.61 per share. This is higher than the current guidance range.

Analysts also expect 2010 earnings growth of 15.6%.

Fundamentals

Zhongpin continues to be cheap. It trades with a forward P/E of just 7.8, which clearly makes it a value stock. The company also has a price-to-book ratio of 1.4.

Zhongpin has stellar trailing return on equity (ROE) of 19% which is far better than the industry average of 11.5%.

The company is now a Zacks #2 Rank (buy) stock.

Read the Dec 28, 2009 article.

Update to Previous Value Zacks Rank Buy Stocks

Cabela’s Inc. (NYSE:CAB) has managed to control its inventory as the consumer finally appears to be returning to the American national pastime: shopping. Revenue jumped 5% in the first quarter. Read the full article.

Metalico Inc. (MEA) saw improvement in the first quarter as sales jumped 152% over a year ago. Metalico took a loss in 2009 but is on track for a profitable 2010. Read the full article.

World Fuel Services Corporation (NYSE:INT) recently surprised on the Zacks Consensus Estimate for the 8th quarter in a row. The company also has attractive valuations, with a forward P/E of 13. Read the full article.

EnPro Industries Inc. (NYSE:NPO) saw sales increase by 23% in the first quarter as demand improved in all of its markets. The company has a solid 5-year average return on equity (ROE) of 14%. Read the full article.

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