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Sanderson Farms (SAFM) Up 17.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Sanderson Farms (SAFM - Free Report) . Shares have added about 17.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sanderson Farms due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Sanderson Farms Posts Loss in Q4, Sales Decline Y/Y

Sanderson Farms posted fourth-quarter fiscal 2018 results, wherein both top and bottom lines deteriorated year over year. Results were hurt by tough market conditions, which worsened during the fourth quarter.

Notably, market prices fell after the Labor Day, owing to soft demand for products manufactured for the company’s foodservice market. These hurdles along with hurricane-related conditions negatively impacted results.

Q4 in Detail

The company reported a loss of $1.95 per share for the quarter. Excluding certain one-time items, Sanderson Farms’ loss came in at $1.63 per share, much wider than the Zacks Consensus Estimate of a loss of $1.09. Also, the bottom line compares unfavorably with the year-ago period’s earnings of $3.20.

Results in the quarter were hit by high costs and increased hurdles related to two hurricanes that impacted operations in North Carolina and Georgia.

Net sales came in at $798.1 million, which was above the Zacks Consensus Estimate of $793 million. However, the top line declined 13.2% year over year.  Sales were hampered by lower average selling price and a decline in the sale of poultry products.

Costs/Margins

Cost of sales for the poultry products rose 4.2%, owing to a 4% rise in feed and boiler processing costs. During the quarter, feed costs in grower and flocks process increased 4% year over year.

SG&A expenses for fiscal 2018 went up by $5.7 million on account of higher administrative salaries and a rise in legal fees, among other factors. In fiscal 2019, the company expects SG&A expenses to be $212.7 million.

Balance Sheet/Cash Flow

Sanderson Farms ended the quarter with cash and cash equivalents of $121.9 million and total shareholders’ equity of $1,387.9 million.

Further, the company bought back 823,385 shares during the fourth quarter, and ended fiscal 2018 with no debt. During fiscal 2018, Sanderson Farms paid dividends worth $29 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.




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