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Sanderson Farms (SAFM) Q2 Earnings Top Estimates, Stock Up

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Sanderson Farms, Inc. posted mixed second-quarter fiscal 2019 results, as the top line missed the Zacks Consensus Estimate, while the bottom line surpassed the same. However, sales grew year over year but earnings dipped marginally.

Results were affected by increased feed costs per pound, though solid poultry products demand from retail grocery customers and a conducive export landscape benefited performance. However, sales were somewhat hampered by reduced volumes of fresh and frozen chicken processed and sold. Market prices of boneless breast remained at low levels, but they improved considerably on a sequential basis. Market prices of jumbo wings indicated robust seasonal demand, and average sales price of fresh and frozen poultry (per pound) grew 3.5%.

Notably, Sanderson Farms’ shares gained 3.2% yesterday, following the results. This Zacks Rank #1 (Strong Buy) stock has rallied almost 24% in the past three months, outpacing the industry’s growth of 9.2%.

Q2 in Detail

The company reported earnings of $1.82 per share, which surpassed the Zacks Consensus Estimate of $1.77. However, the bottom line dipped 0.5% year over year.

Sanderson Farms, Inc. Price, Consensus and EPS Surprise



Sanderson Farms, Inc. Price, Consensus and EPS Surprise

Sanderson Farms, Inc. price-consensus-eps-surprise-chart | Sanderson Farms, Inc. Quote

 

Net sales came in at $845.1 million, which fell short of the Zacks Consensus Estimate of $850 million. Nevertheless, the top line advanced 3.9% year over year.  

Costs/Margins

Cost of sales escalated 5.3% to $740.8 million. Average feed costs per pound for poultry products rose 3%. Costs of soybean meal went down 11.6% and prices of corn rose 4.9%. Soybean meal and corn are part of the company’s primary feed ingredients.

SG&A expenses fell 10.6% to $49.2 million. The company expects SG&A expenses to be $50 million in the third quarter of fiscal 2019 and $52 million in the fourth quarter.

Balance Sheet/Cash Flow

Sanderson Farms ended the quarter with cash and cash equivalents of $96.9 million, long-term debt of $100 million and total shareholders’ equity of $1,400.7 million.

Outlook

The company continues to anticipate prices paid for grain in the second half of fiscal 2019 to be lower than that of fiscal 2018. A soft start to the 2019 U.S. planting season for soybeans and corn (due to cold and wet spring in the U.S. grain belt) has further increased market prices of the same.

Per the current USDA projections, the U.S. broiler production in calendar year 2019 is expected to rise nearly 0.9% from full-year 2018. Further, production in the third and fourth quarters of fiscal 2019 is anticipated to increase 6% and 7.5%, respectively.

Additionally, the company anticipates $255 million of capital expenditure for fiscal 2019.

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