Source: MEATINGPLACE, 10/14/11


Lower feed costs have prompted another Wall Street analyst to boost profit forecasts for the big chicken processors, saying the “chicken cycle is in the early stages of a recovery.”

USDA this week boosted its forecast for U.S. corn ending stocks by 29 percent from a month ago, above what analysts were expecting. 

Strong export demand for U.S. chicken should continue with global red meat production expected to decline next year, said KeyBanc Capital Markets analyst Akshay Jagdale. But the analyst cautioned that while the industry’s outlook is improving, food service demand remains anemic, and production cutbacks will not be enough to return companies to normalized earnings levels in 2012.  

Jagdale raised Tyson Foods’ 2012 earnings projection to $2.40 per share from $2.13 forecast previously and Sanderson Farms to $1.27 per share from $1.07. Pilgrim’s Pride is now forecast to post a modest profit of 17 cents per share, up from a projected loss of 5 cents.

Goldman Sachs recently placed Sanderson on its list of top stock picks, predicting a smaller breeder flock and improving chicken prices. 

For the three companies, feed costs are expected to be up about 9 cents a pound over the two-year period from 2010-2012, reflecting 2012 futures prices for corn of $6.25 per bushel and soybean meal of $315 per short ton, said Jagdale, who has a “buy” rating on Tyson shares and “hold” ratings on Sanderson and Pilgrim’s Pride.

KeyBanc also is projecting an increase in revenue per pound of 8 percent for Sanderson, 3 percent for Tyson and 5 percent for Pilgrim’s Pride.

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