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Analysts see chicken industry production heading up
Story Date: 12/20/2012
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Source: MEATINGPLACE, 12/19/12
Wall Street analysts evaluating the impact of Sanderson Farms’ strong quarterly earnings report said they expect increased chicken industry production to put the brakes on the company’s stock price.
BMO Capital Markets analyst Kenneth Zaslow said the industry has yet to align supply with demand and predicted production with increase in the fourth quarter. He does not anticipate production cuts in 2013.
“In fact, (Sanderson) and industry chicken production may exceed expectations as Sanderson exceeded its production guidance in each of the past nine quarters by an average of 4 percent,” Zaslow said in a note to clients Wednesday.
Zaslow, who maintained a market-perform rating and $42 target on Sanderson stock, said he was uncertain whether the company could achieve normal margins in fiscal 2014 because the industry may build production if next year’s U.S. harvest looks favorable, which would pressure prices.
Stephens Inc. analyst Farha Aslam kept an equal-weight rating and $50 price target on Sanderson. While she expects Sanderson to produce fewer pounds in fiscal 2013, she said sees industry production up slightly from the prior year, driven by higher bird weights.
BB&T analyst Heather Jones, noting Sanderson management struck an optimistic tone on the earnings, predicted production volume would decline 1.1 percent this year, but noted pounds produced were stronger than expected in the fourth quarter as the company increased slaughter to limit higher weights.
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