Sanderson Farms Flies Past Analysts in Fiscal Third Quarter

Andrew Klips  |

Poultry producer Sanderson Farms, Inc. (SAFM) on Tuesday reported fiscal third quarter results that topped Wall Street’s view as improved market conditions supported higher prices for poultry products, which more than offset rising costs.

For the quarter ended July 31, the Laurel, Mississippi-based company posted revenue of $738.96 million, compared to $624.85 million in last year’s quarter.  Net income soared to $67.92 million, or $2.95 per share, versus $28.72 million, or $1.25 per share, in the year prior quarter.

Analysts were expecting earnings of $2.62 per share on revenue of $722.0 million.

Overall market prices where higher last quarter compared to the third quarter of 2012.  As measured by a simple average of the Georgia dock price for whole chickens, prices increased 11.6 percent compared to the same time last year.  Additionally, prices for boneless breasts were up by 32.3 percent.  Bulk leg quarters were essentially flat, while prices for jumbo wings were down by 19.3 percent.

Feed prices continued to assert negative pressure on chicken farmers with corn prices increasing 8.1 percent year-over-year and soybean meal prices rising by 10.3 percent.  Cost of sales rose to $605.02 million last quarter from $555.24 million a year earlier.

Higher grain prices may be set for some relief, thanks to favorable growing conditions this summer.  “While the available grain quantity and prices during the coming months will ultimately depend on this year’s final crop performance, prices have recently moved lower,” said Sanderson Farms chairman and chief executive Joe Sanderson, Jr. in today's statement.

Many analysts expect grain prices to rise slightly this week with a hot spell forecast through the Midwest, but prices are anticipated to have peaked and continue to head lower through 2014.

Sanderson explained that it if the company priced all its corn and soybean meal needs at Monday’s closing prices, costs in the fourth quarter would be $65 million lower than in the 2012 quarter.

For the first nine months of the fiscal year, net sales were up to $1.96 billion from $1.74 billion in 2012.  Net income was $85.3 million, or $3.71 per share, compared to $44.6 million, or $1.94 per share, last year.

Rival Pilgrim Pride Corp. (PPC) has also benefited from rising poultry prices, topping profit estimates with its second-quarter earnings report on July 31.  Revenue was in line with expectations at $2.18 billion for the quarter, but earnings per share at 74 cents outpaced consensus expectations of 57 cents.

Speaking of chicken, McDonalds Corp. (MCD) reported Monday that they will be adding chicken wings, called “Mighty Wings,” to their menu for a limited time.  The rollout is expected to be complete by September 24.

Shares of Sanderson Farms closed down by 2.4 percent on Monday at $69.79, but are up on extremely low volume in pre-market activity at $72.45 Tuesday morning.  Through Monday’s close, shares of SAFM are ahead about 47 percent in 2013.

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