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Grain price pullback will limit Sanderson losses: analyst
Story Date: 10/19/2012
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Source: MEATINGPLACE, 10/19/12
A Wall Street analyst raised her price target for shares of Sanderson Farms, predicting the company will benefit from the recent retreat in grain prices.
However, the poultry industry will be slow to implement anticipated production cuts, which will dampen an earnings rebound, Stephens Inc. analyst Farha Aslam said.
She boosted her stock price target for Sanderson to $38 from $30, while keeping an “equal-weight” rating on the shares.
Soybean prices have pulled back in recent weeks from record highs seen in early September.
Aslam raised her fiscal 2012 estimate for Sanderson’s per-share earnings by 20 cents to $2.20. She expects the company to lose money in the first quarter of fiscal 2013, but said the loss will be less steep than previously forecast due to the moderating grain costs.
Poultry producers overall still have strong balance sheets and are just starting to post negative earnings, Aslam noted.
Sanderson expects industry production cuts could be delayed until the first quarter of calendar 2013 because profitability has held up better than expected in September and October, the analyst said.
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