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Sanderson Farms (SAFM) to Post Q4 Earnings: What's in Store?

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Sanderson Farms, Inc. (SAFM - Free Report) is likely to register bottom-line growth when it reports fourth-quarter fiscal 2020 numbers on Dec 17. The Zacks Consensus Estimate has been unchanged over the past 30 days at a loss of 8 cents per share, suggesting a considerable improvement from the year-ago period’s loss of 95 cents. Moreover, Sanderson Farms’ bottom line has surpassed the Zacks Consensus Estimate by a wide margin in the trailing four quarters, on average.

The Zacks Consensus Estimate for revenues is pegged at $909 million compared with $906.5 million reported in the prior-year period.

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

Key Factors to Note

The company has been benefiting from its efforts to strengthen its product portfolio. Additionally, favorable feed costs have been aiding. During third-quarter fiscal 2020, Sanderson Farms’ average feed cost per pound for poultry products declined 5.6% year over year. Costs of cornmeal and soybean meal decreased 9.6% and 3.2%, respectively, in the quarter. Further, management anticipates a year-over-year decline of 83 cents per pound in feed grain cost of chicken processed, in fiscal 2020. This also bodes well for the quarter under review.

However, Sanderson Farms has been witnessing reduced demand from foodservice customers due to the closure of various away-from-home channels amid the pandemic. Incidentally, the company resorted to certain planned production cuts at its food service units, compelled by reduced demand from foodservice customers. In fact, management expects total production during the fiscal fourth quarter to have declined 5%.

Apart from this, the company has been incurring increased operating costs related to higher employee expenses amid the COVID-19 outbreak. Management on its last earnings call stated that it expects reduced volumes along with increased operating costs to persist throughout fiscal 2020 and beyond until the situation improves. Moreover, any export market challenges and unfavorable price realizations might have weighed on the company’s performance.

What the Zacks Model Unveils

Our proven model doesn’t conclusively 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 currently has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%.

Stocks With Favorable Combinations

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 this season.

General Mills (GIS - Free Report) has an Earnings ESP of +1.34% and currently, a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here

McCormick & Company (MKC - Free Report) has an Earnings ESP of +1.11% and a Zacks Rank #3, at present.

Constellation Brands (STZ - Free Report) has an Earnings ESP of +3.07% and a Zacks Rank #3, currently.

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