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Sanderson Farms, Inc. (SAFM - Snapshot Report) reported lower-than-expected results for third-quarter fiscal 2014 (ended Jul 31, 2014). Earnings came in at $3.30 per share, up 11.9% from $2.95 earned in the year-ago quarter. However, the bottom line lagged the Zacks Consensus Estimate of $3.86 by 14.5%.

The improved result was driven by higher sales, lower grain costs and increased demand for poultry products.

Revenues

Sanderson Farms generated net sales of $768.4 million, reflecting a year-over-year increase of 4%. However, the top line too, fell short of the Zacks Consensus Estimate of $779 million.

Revenue performance was driven by high demand for poultry products coupled with higher market prices.

Margins

Sanderson Farms' cost of sales inched up 0.3% year over year, and as a percentage of revenue was 79% versus 81.9% in the prior-year quarter. Selling, general and administrative (SG&A) expenses increased 54.8% year over year, representing 5.9% of net sales.

Operating income grew 10.8% year over year, with a margin of 15.1% as against 14.1% for the year-ago quarter.
 
Balance Sheet and Cash Flow

Exiting third-quarter fiscal 2014, Sanderson Farms’ cash and cash equivalents increased to $139.3 million from $84.4 million in the preceding quarter. Long-term debt, net of current maturities, remained stable sequentially at $10 million.

In the nine months ended Jul 31, Sanderson Farms generated cash of $197.3 million from its operating activities, increasing 26.1% from $156.5 million generated in the prior-year period. Capital spending totalled $113.4 million, up significantly from $39.7 million spent in the year-ago comparable period.  

Sanderson Farms is an integrated poultry-processing company, engaged in the production, processing, marketing and distribution of fresh and frozen chicken products in the U.S.

With a market capitalization of $2.1 billion, Sanderson Farms currently sports a Zacks Rank #1 (Strong Buy).  

Other companies worth considering in the industry include Pilgrim's Pride Corporation (PPC - Snapshot Report), Hormel Foods Corporation (HRL - Analyst Report), and The WhiteWave Foods Company (WWAV - Snapshot Report). While Pilgrim's Pride sports a Zacks Rank #1 (Strong Buy), both Hormel Foods and The WhiteWave Foods carry a Zacks Rank #2 (Buy).

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