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Sanderson Farms (SAFM) Q3 Earnings & Sales Fall Year on Year
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Sanderson Farms, Inc. posted dismal third-quarter fiscal 2018 results, as both top and bottom lines declined year over year and fell short of the Zacks Consensus Estimate. This marked the company’s second and fourth consecutive sales and earnings miss, respectively. Results were hurt by lower average selling prices as well as increased costs of sales.
Sanderson Farms’ murky surprise history caused this Zacks Rank #5 (Strong Sell) stock to plunge 22.7% in a year, wider than the industry’s decline of 14.6%.
Q3 in Detail
Earnings in the reported quarter came in at 50 cents per share, lagging the Zacks Consensus Estimate of $1.00. The bottom line was considerably lower than $5.09 reported in the year-ago period.
Sanderson Farms, Inc. Price, Consensus and EPS Surprise
Net sales came in at $852.4 million, missing the Zacks Consensus Estimate of $866 million. Moreover, the top line declined 8.5% year over year. Well, poultry products net sales fell 11% to $790.4 million on account of lower average sales price, somewhat compensated by higher pounds of poultry sold.
Further, the results were hurt by low market prices of boneless breast meat prepared for food service customers. In fact, market prices were significantly down for boneless breast meat, jumbo wings, chicken breast tenders, bulk leg quarters and boneless thigh meat prepared at the company’s plants, which process a larger bird. The year-over-year fall in prices was partly accountable to lower chicken promotions at food service and retail grocery stores along with competition from other protein suppliers.
Costs/Margins
Sanderson Farms’ margins were affected by counter-seasonal declines in selling prices as well as increased average cost of goods sold. Cost of sales in the quarter escalated 12.8% to $781.6 million.
During the quarter, feed costs per pound of chicken processed increased 5.8% year over year and 7.7% sequentially. Average feed cost per pound of poultry products processed also rose 5.8% from the third quarter of fiscal 2017. Notably, Sanderson Farms witnessed a rise in prices of corn and soybean meal, which are its main feed ingredients. Further, non-feed costs related to costs of poultry products sold went up by 3.8%, due to a rise in expenses associated with freight, labor, packaging, repairs, various fixed costs and contract grower pay among others.
Selling, general and administrative expenses went down 10.1% to $55.8 million. Operating income decreased significantly from $177.3 million to $15.1million, leading to a sharp contraction in the operating margin.
Balance Sheet/Cash Flow
Sanderson Farms ended the quarter with cash and cash equivalents of $288.3 million and total shareholders’ equity of $1,525 million.
In the first nine months of fiscal 2018, the company generated $103.9 million as net cash provided operating activities. Capital expenditures during the same period were $216.6 million.
Outlook
The USDA projects chicken production to grow 2.3% in 2018. Further, competition from other protein suppliers is likely to keep market prices under pressure.
Chefs’ Warehouse (CHEF - Free Report) , with long-term earnings per share growth rate of 22%, carries a Zacks Rank #2 (Buy).
Pinnacle Foods has long-term earnings per share growth rate of 8% and a Zacks Rank #2.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
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Sanderson Farms (SAFM) Q3 Earnings & Sales Fall Year on Year
Sanderson Farms, Inc. posted dismal third-quarter fiscal 2018 results, as both top and bottom lines declined year over year and fell short of the Zacks Consensus Estimate. This marked the company’s second and fourth consecutive sales and earnings miss, respectively. Results were hurt by lower average selling prices as well as increased costs of sales.
Sanderson Farms’ murky surprise history caused this Zacks Rank #5 (Strong Sell) stock to plunge 22.7% in a year, wider than the industry’s decline of 14.6%.
Q3 in Detail
Earnings in the reported quarter came in at 50 cents per share, lagging the Zacks Consensus Estimate of $1.00. The bottom line was considerably lower than $5.09 reported in the year-ago period.
Sanderson Farms, Inc. Price, Consensus and EPS Surprise
Sanderson Farms, Inc. Price, Consensus and EPS Surprise | Sanderson Farms, Inc. Quote
Net sales came in at $852.4 million, missing the Zacks Consensus Estimate of $866 million. Moreover, the top line declined 8.5% year over year. Well, poultry products net sales fell 11% to $790.4 million on account of lower average sales price, somewhat compensated by higher pounds of poultry sold.
Further, the results were hurt by low market prices of boneless breast meat prepared for food service customers. In fact, market prices were significantly down for boneless breast meat, jumbo wings, chicken breast tenders, bulk leg quarters and boneless thigh meat prepared at the company’s plants, which process a larger bird. The year-over-year fall in prices was partly accountable to lower chicken promotions at food service and retail grocery stores along with competition from other protein suppliers.
Costs/Margins
Sanderson Farms’ margins were affected by counter-seasonal declines in selling prices as well as increased average cost of goods sold. Cost of sales in the quarter escalated 12.8% to $781.6 million.
During the quarter, feed costs per pound of chicken processed increased 5.8% year over year and 7.7% sequentially. Average feed cost per pound of poultry products processed also rose 5.8% from the third quarter of fiscal 2017. Notably, Sanderson Farms witnessed a rise in prices of corn and soybean meal, which are its main feed ingredients. Further, non-feed costs related to costs of poultry products sold went up by 3.8%, due to a rise in expenses associated with freight, labor, packaging, repairs, various fixed costs and contract grower pay among others.
Selling, general and administrative expenses went down 10.1% to $55.8 million. Operating income decreased significantly from $177.3 million to $15.1million, leading to a sharp contraction in the operating margin.
Balance Sheet/Cash Flow
Sanderson Farms ended the quarter with cash and cash equivalents of $288.3 million and total shareholders’ equity of $1,525 million.
In the first nine months of fiscal 2018, the company generated $103.9 million as net cash provided operating activities. Capital expenditures during the same period were $216.6 million.
Outlook
The USDA projects chicken production to grow 2.3% in 2018. Further, competition from other protein suppliers is likely to keep market prices under pressure.
Check These Solid Stocks
Medifast (MED - Free Report) , with a Zacks Rank #1 (Strong Buy), delivered positive earnings surprise in the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chefs’ Warehouse (CHEF - Free Report) , with long-term earnings per share growth rate of 22%, carries a Zacks Rank #2 (Buy).
Pinnacle Foods has long-term earnings per share growth rate of 8% and a Zacks Rank #2.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>