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Sanderson Farms (SAFM) Q3 Earnings Beat Estimates, Sales Up
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Sanderson Farms, Inc. posted third-quarter fiscal 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Quarterly sales increased year over year, while earnings fell from the prior-year quarter’s figure.
During the fiscal third quarter, average boneless breast meat market prices increased 3.2% year over year. However, average market price for bulk leg quarters, chicken breast tenders and jumbo wing prices fell 39.1%, 26.8% and 13.2%, respectively.
Meanwhile, Sanderson Farms witnessed significant demand from retail grocery store customers amid the coronavirus outbreak. However, it saw reduced demand from food service customers due to closures of various away from home channels amid the pandemic.
Q3 in Detail
The company reported earningsof $1.48 per share, which beat the Zacks Consensus Estimate of 7 cents. However, earnings fell 38.6% from the reported figure of $2.41 per share in the year-ago quarter.
Net sales came in at $956.5 million, which surpassed the Zacks Consensus Estimate of $927.1 million. Moreover, the metric increased 1.2% from $945.2 million posted in the year-ago quarter.
Sanderson Farms, Inc. Price, Consensus and EPS Surprise
Cost of sales increased 5.1% to $866 million. Average feed costs per pound for poultry products declined 5.6%. Costs of corn meal and soybean meal declined 9.6% and 3.2%, respectively, in the quarter. Soybean meal and corn are part of the company’s primary feed ingredients. Further, SG&A expenses fell 3.1% to $50.6 million in the reported quarter.
Balance Sheet
Sanderson Farms ended the quarter with cash and cash equivalents of $66.1 million, long-term debt of $95 million and total shareholders’ equity of $1,399.3 million.
Outlook
Per the current USDA projections, broiler production in the industry during calendar year 2020 is expected to increasenearly 2.7% from 2019 levels. Also, the company resorted to certain planned production cuts at its food service units compelled by reduced demand from food service customers amid the pandemic. Incidentally, management expects total production during the fiscal fourth quarter to be down 5% year over year.
Apart from these, the company has been incurring increased operating costs related to higher employee expenses amid the COVID-19 outbreak. Notably, reduced volumes along with increased operating costs are likely to persist throughout fiscal 2020. Nevertheless, management anticipates feed grain costs to decline 0.83 cents per pound of poultry processed year over year for fiscal 2020.
Shares of this Zacks Rank #3 (Hold) company have declined 29.9% so far this year compared with the industry’s decline of 11.9%.
McCormick (MKC - Free Report) has a long-term earnings growth rate of 5.8% and a Zacks Rank #2.
B&G Foods (BGS - Free Report) , with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 6.9%, on average.
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Sanderson Farms (SAFM) Q3 Earnings Beat Estimates, Sales Up
Sanderson Farms, Inc. posted third-quarter fiscal 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Quarterly sales increased year over year, while earnings fell from the prior-year quarter’s figure.
During the fiscal third quarter, average boneless breast meat market prices increased 3.2% year over year. However, average market price for bulk leg quarters, chicken breast tenders and jumbo wing prices fell 39.1%, 26.8% and 13.2%, respectively.
Meanwhile, Sanderson Farms witnessed significant demand from retail grocery store customers amid the coronavirus outbreak. However, it saw reduced demand from food service customers due to closures of various away from home channels amid the pandemic.
Q3 in Detail
The company reported earningsof $1.48 per share, which beat the Zacks Consensus Estimate of 7 cents. However, earnings fell 38.6% from the reported figure of $2.41 per share in the year-ago quarter.
Net sales came in at $956.5 million, which surpassed the Zacks Consensus Estimate of $927.1 million. Moreover, the metric increased 1.2% from $945.2 million posted in the year-ago quarter.
Sanderson Farms, Inc. Price, Consensus and EPS Surprise
Sanderson Farms, Inc. price-consensus-eps-surprise-chart | Sanderson Farms, Inc. Quote
Costs/Margins
Cost of sales increased 5.1% to $866 million. Average feed costs per pound for poultry products declined 5.6%. Costs of corn meal and soybean meal declined 9.6% and 3.2%, respectively, in the quarter. Soybean meal and corn are part of the company’s primary feed ingredients. Further, SG&A expenses fell 3.1% to $50.6 million in the reported quarter.
Balance Sheet
Sanderson Farms ended the quarter with cash and cash equivalents of $66.1 million, long-term debt of $95 million and total shareholders’ equity of $1,399.3 million.
Outlook
Per the current USDA projections, broiler production in the industry during calendar year 2020 is expected to increasenearly 2.7% from 2019 levels. Also, the company resorted to certain planned production cuts at its food service units compelled by reduced demand from food service customers amid the pandemic. Incidentally, management expects total production during the fiscal fourth quarter to be down 5% year over year.
Apart from these, the company has been incurring increased operating costs related to higher employee expenses amid the COVID-19 outbreak. Notably, reduced volumes along with increased operating costs are likely to persist throughout fiscal 2020. Nevertheless, management anticipates feed grain costs to decline 0.83 cents per pound of poultry processed year over year for fiscal 2020.
Shares of this Zacks Rank #3 (Hold) company have declined 29.9% so far this year compared with the industry’s decline of 11.9%.
3 Solid Food Stocks
Campbell Soup (CPB - Free Report) has a long-term earnings growth rate of 8.3% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
McCormick (MKC - Free Report) has a long-term earnings growth rate of 5.8% and a Zacks Rank #2.
B&G Foods (BGS - Free Report) , with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 6.9%, on average.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q2 2020, while the S&P 500 gained an impressive +44.0%, five of our strategies returned +50.9%, +93.8%, +122.2%, +153.0%, and even +156.8%.
This outperformance has not just been a recent phenomenon. From 2000 – Q2 2020, while the S&P averaged +5.5% per year, our top strategies averaged up to +51.7% per year.
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