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Sanderson Farms (SAFM) Q1 Earnings Likely to Fall: Here's Why

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Sanderson Farms, Inc. (SAFM - Free Report) is scheduled to report first-quarter fiscal 2019 results on Feb 26, before the opening bell. In the trailing four quarters, this meat products player’s bottom line has underperformed the Zacks Consensus Estimate by average of 36%. Also, the company delivered a negative earnings surprise of 49.5% in the last reported quarter. Let’s see what awaits this quarterly release.

How are Estimates Faring?

The Zacks Consensus Estimate for the quarter under review is pegged at a loss of $1.82, against earnings of 60 cents per share reported in the year-ago quarter. Notably, the estimates improved 59 cents over the past seven days. For revenues, the consensus mark is pegged at $693.5 million, down approximately 10.2% from the year-ago quarter’s figure.

Sanderson Farms, Inc. Price and EPS Surprise

Sanderson Farms, Inc. Price and EPS Surprise | Sanderson Farms, Inc. Quote

What’s Weighing on the Stock?

Sanderson Farms is reeling under elevated SG&A costs for the past two quarters. Notably, the company’s SG&A costs increased 1.3% and 5% during the preceding two quarters on a sequential basis. Moving ahead, the company expects SG&A costs to rise further, with costs of $60 million estimated for first-quarter fiscal 2019.

Other food companies like General Mills (GIS - Free Report) are also seeing increased cost woes. Coming back to Sanderson Farms, rise in freight and ship costs along with increased costs of poultry products were primary concerns in the last reported quarter. Persistence of these trends may affect the company’s bottom line in the to-be-reported quarter.

However, Sanderson Farms has been strengthening portfolio by adding new products. The company is known for its processed and prepared chicken products available in varied sizes that are sold in foreign markets like Mexico, Middle East and Central Asia. This has been leading to an increase in export sales, which may offer some cushion to the company in the upcoming release.

What the Zacks Model Unveils

Our proven model does not conclusively show that Sanderson Farms is likely to beat earnings estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Sanderson Farms has a Zacks Rank #3, its Earnings ESP of -38.46% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

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:

Turning Point Brands (TPB - Free Report) has an Earnings ESP of +10.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tupperware Brands Corporation (TUP - Free Report) has an Earnings ESP of +2.2% and a Zacks Rank #3.

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