Source: MEATINGPLACE, 2/26/16

Sanderson Farms’ first-quarter results were modestly better than expected, suggesting the company will soon put the chicken industry’s cyclical downturn behind it, several Wall Street analysts said.

Seasonal price declines were more muted than expected this winter, production should remain in check, feed costs are set to fall further and export markets are likely to reopen, said BMO Capital Markets analyst Kenneth Zaslow.

“We continue to believe (the first quarter) likely will mark the low in chicken margins,” Zaslow wrote in a note to clients.
Open to acquisitions

Sanderson also indicated it is willing acquire new assets to boost prepared foods sales to 10 percent of total sales, a statement noted by several analysts.

BB&T Capital Markets analyst Brett Hundley said Sanderson processed more pounds than originally expected due to more robust yields and weights, leading to high volumes sold. The company’s plants are operating at a high level, and a new breed of chicken it has adopted is converting feed at a strong rate, he added.

“We think it’s best to ramp up expectations on volumes, at least over the near term. Given seasonally improved market conditions, this extra volume is welcomed,” Hundley wrote to clients.

Stephens analyst Farha Aslam said overall trends in the chicken complex, particularly in boneless breast meat and leg quarters, improved considerably in January compared to the November and December lows.

“Sanderson is operating well and is poised to benefit from higher volume, a pickup in pricing, as well as a benign grain environment,” she said.

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