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Most analysts impressed with Sanderson earnings, upgrade forecasts
Story Date: 5/31/2012
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Source: Rita Jane Gabbett, MEATINGPLACE, 5/30/12
Sanderson Farms shares fell yesterday even as it reported strong second-quarter earnings, but three Wall Street analysts today boosted their earnings-per-share forecasts based on what they heard from the company about its recent results and prospects for the future.
Stephens Inc. analyst Farha Aslam increased her fiscal 2012 operating earnings-per-share forecast to $3.60 from $3.30, largely reflecting the outperformance in the second quarter, and boosted her fiscal 2013 forecast to $5.70 from $4.50.
“The increase is largely driven by lower feed costs given the record U.S. grain plantings and anticipation of a large harvest,” she wrote in a note to investors.
Aslam attributed yesterday’s share price decline to concern about recent softening in boneless skinless breast meat prices and a moderation in leg quarter pricing, as well as uncertainty regarding the Mexican export situation. Sanderson Farms shares rebounded by 71 cents to $53.37 per share in morning trade on the NASDAQ exchange.
BMO Capital Markets analyst Kenneth Zaslow raised his fiscal 2012 earnings forecast to $3.20 per share from $2.91, but maintained his “market perform” recommendation on the stock.
“The U.S. chicken industry is undoubtedly enjoying the early stages of the chicken recovery; however, the combination of slowing production cuts (even potential production expansion), higher soybean meal costs, and limited upside to chicken prices keep us on the sidelines,” Zaslow wrote in a note to investors.
BB&T Capital Markets analyst Heather Jones raised her fiscal 2012 forecast to $3.75 from $3.70 and her fiscal 2013 forecast to $4.55 from $4.38.
“In our view, SAFM's (second half 2012) performance should be very strong despite higher feed costs. Processing costs are likely to fall further and pricing should be strong. Management confirmed that retail demand has strengthened and despite weaker pork prices, feature activity continues to accelerate. Foodservice has been sluggish, but tight supply has bolstered pricing even there,” Jones wrote in a note to investors.
On the other hand
Deutsche Bank analyst Christina McGlone, however, lowered her fiscal 2012 earnings forecast to $3.87 from $4.06 per share.
“Our revision for higher 2H poultry pricing (based on wings) is offset by 1) higher near-term feed costs, 2) lower prepared foods segment, 3) raised our 2H tax rate, per guidance today,” McGlone wrote in a note to investors.
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