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Here's How Sanderson Farms (SAFM) Looks Ahead of Q3 Earnings

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Sanderson Farms, Inc. (SAFM - Free Report) is likely to post a decline in the top and bottom line when it reports third-quarter fiscal 2020 numbers on Aug 27. The Zacks Consensus Estimate for fiscal third-quarter earnings has moved down almost 80% in the past seven days to 14 cents per share. This suggests considerable deterioration from earnings of $2.51 registered in the year-ago quarter. We note that the company has a trailing four-quarter negative earnings surprise of 49.9%, on average. In the last reported quarter, the company delivered a negative earnings surprise of 78.8%.

The consensus estimate for quarterly revenues is pegged at $922.2 million, which suggests a decline of 2.4% from the prior-year quarter’s tally.

Factors to Note

Due to the coronavirus outbreak, Sanderson Farms has been incurring higher operating expenses like employee expenses. During its last earnings call, the company stated that it expects to take certain planned production cuts in the food service units due to coronavirus-induced hurdles for the remaining half of fiscal 2020. We believe that such rise in costs along with curtailed production is likely to have exerted pressure on the company’s performance in the fiscal third quarter.

In its second-quarter earnings call, the company said that it anticipates a decline in feed grain costs for the remaining half of fiscal 2020. This is likely to have had a positive impact on its performance in the to-be-reported quarter. Apart from this, Sanderson Farms’ efforts to expand its capacity bode well. In this regard, the company’s recently-constructed poultry processing complex in Tyler, TX has been performing well.

Sanderson Farms, Inc. Price and EPS Surprise

Sanderson Farms, Inc. Price and EPS Surprise

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

What the Zacks Model Unveils

Our proven model doesn’t predict an earnings beat for Sanderson Farms this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Sanderson Farms carries a Zacks Rank #5 (Strong Sell) and an Earnings ESP of -211.11%.

Stocks With a Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Campbell Soup (CPB - Free Report) has an Earnings ESP of +0.24% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hormel Foods (HRL - Free Report) has an Earnings ESP of +8.27% and a Zacks Rank #3.

Coty (COTY - Free Report) has an Earnings ESP of +2.78% and a Zacks Rank #3.

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