Source:  Chris Scott, MEATINGPLACE.COM, 11/1/10

Despite positive outlooks for earnings for poultry producers as 2010 draws to a close, higher feed prices may put a damper on earnings in the sector for 2011, analysts predict.

Kenneth Zaslow of BNO Capital Markets expects Pilgrim’s Pride to continue to build on last week’s strong third-quarter earnings of $0.27 per share thanks to several cost-cutting and operational factors. The company expects to see higher demand from retail and foodservice customers, but earnings may be negatively affected by higher feed costs in 2011, Zaslow said.

Similarly, Tyson Foods is expected to report very strong earnings in the fourth quarter, although BB&T Capital Markets analyst Heather Jones lowered estimates for next year to $1.50 from $2.10 a share in light of higher feed costs and a moderation in beef and pork margins. Tyson is expected to have a challenging year in 2011, although BB&T predicts that the company’s diversified platform should help it weather current chicken industry dynamics.

BB&T’s Jones also lowered 2011 estimates for Sanderson Foods to $2.05 from $4.70 a share despite increasing fourth-quarter earnings estimates to $1.85 from $1.35 per share. Analysts do not believe that Sanderson Farms has hedges against expected instability in feed prices next year, prompting its downward estimate revision.

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