Source:  MEATINGPLACE.COM, 11/12/10

BMO Capital Markets analyst Kenneth Zaslow has cut his profit outlook and stock price targets for Tyson Foods and Sanderson Farms, taking the poultry industry to task in his latest note to clients.

In a report titled “You Can Lead a Chicken to Water, But You Can’t Make It Drink,” the analyst said the industry will feel the effects of its “uninhibited expansion” beginning in the first quarter of 2011.

He singled out Pilgrim’s Pride and Sanderson as chief culprits but noted expansion appears broad-based and pervasive across the industry.

“While the industry may be inclined to blame corn (ethanol) and Russia, the reality is that the industry has no one to blame except itself,” Zaslow said.

“In fact,” he continued, “if the chicken industry showed any sense of restraint, chicken industry margins would have only retreated to breakeven levels for a short time as opposed to potential losses through February.”

Restraint across other industries has produced near-record hog, pork, cattle, beef and turkey prices, while the US chicken industry's behavior has produced $1.00 to $1.20 breast prices, Zaslow lamented.

He slashed his fiscal 2011 profit forecast for Sanderson to $4.23 a share from $5.03 and his outlook for the stock to $55 from a prior $70 target. For Tyson, Zaslow cut his 2011 profit estimate to $1.70 from $2.01 and his stock price target to $20 from $25.

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