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Sanderson Farms (SAFM) Beats on Q2 Earnings and Revenues

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Premium Food-Major Diversified company, Sanderson Farms, Inc. reported better-than-expected second-quarter fiscal 2017 (ended Apr 30, 2017) results. The company noted that the stellar performance was stemmed by increased demand for poultry products, rise in volumes and favorable export environment.  

Over the last one month, shares of this Zacks Rank #3 (Hold) stock yielded 0.36% return, as against the loss of 4.31% incurred by the Zacks categorized Food - Meat Products industry.

Earnings and Revenues

Quarterly earnings came in at $2.94 per share, comfortably surpassing the Zacks Consensus Estimate of $2.75. The bottom line also came higher than the year-ago tally of $2.11 per share.

 

Net sales in the reported quarter came in at $802 million, beating the Zacks Consensus Estimate of $772 million. In addition, the top line grew 15.9% year over year. The upside was backed by stronger demand and favorable market prices of products. Notably, the company stated that sales volume during the reported quarter was higher on account of increased productivity accrued from the company’s new facilities at St. Pauls, NC, and Palestine, TX.

Costs and Margins

Cost of sales in the fiscal second quarter was $655.3 million, higher than $578.3 million reported in the year-ago period. Selling, general and administrative expenses were $43.6 million, higher than $40 million recorded in the year-ago quarter.

Operating margin in the fiscal second quarter came in at 12.9%, expanding 220 basis points (bps) year over year.

Cash Flow and Balance Sheet  

In first-half fiscal 2017, the company provided $116.8 million cash from operating activities, as against $107.7 million cash generated in the year-earlier period. Capital expenditures came in at $96.6 million compared to $67.3 million recorded in the year-ago period.

Exiting the quarter, the company had cash and cash equivalents worth $246.3 million, as against $234.1 million recorded at the end of fiscal 2016.

Outlook

Sanderson Farms anticipates that its aggregate productivity in the fiscal third and fourth quarters would improve 13.6% and 11.7%, respectively, on a year-over-year basis. The company's growth would be backed by increased production of the company’s new facilities in Texas and North Carolina. Market prices of products are anticipated to improve in the quarters ahead on account of sturdy demand.

Stocks to Consider

Some better-ranked stocks in the industry are listed below:

Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) delivered an average earnings surprise of 16.80% for the trailing four quarters and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aramark Holdings Corp (ARMK - Free Report) , which carries a Zacks Rank #2 (Buy) at present, pulled off an average earnings surprise of 4.45% in the last four quarters.

Energizer Holdings, Inc. (ENR - Free Report) also carries a Zacks Rank #2 and delivered an average earnings surprise of 21.55% over the past four quarters.

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