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Sanderson Farms (SAFM) Down as Q1 Earnings & Sales Fall Y/Y

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Sanderson Farms, Inc. (SAFM - Free Report) posted first-quarter fiscal 2019 results, wherein both top and bottom lines declined year over year. Results were hurt by tough market conditions that led to reduced prices for boneless breast meat to a large extent. In fact, boneless breast meat prices dropped to historic lows in November and December, with January prices being relatively weak. Overall lower poultry prices also negatively impacted results.

Notably, Sanderson Farms lost nearly 2.6% yesterday, following the results.

Q1 in Detail

The company reported a loss of 82 cents per share in the quarter, which was narrower than the Zacks Consensus Estimate of a loss of $1.82. However, the bottom line compares unfavorably with the year-ago period’s earnings of $2.24.

Net sales came in at $743.4 million, which was above the Zacks Consensus Estimate of $694 million. However, the top line declined 3.7% year over year.  Sales were hampered by lower average selling prices and a decline in the sale of poultry products.


Cost of sales of poultry products fell 1.3%, owing to lower pounds sold, partly negated by rise in average cost of goods sold.

SG&A expenses for first-quarter fiscal 2019 went up 11.3% to $58.5 million. This rise can be attributable to costs related to Tyler, a startup operation in Texas, and rise in legal fees, negated by decrease in marketing and stock compensation costs.

Going ahead, the company expects SG&A expenses to be $50 million in the second and third quarters of fiscal 2019, and $52 million in the final fiscal quarter.

Balance Sheet/Cash Flow

Sanderson Farms ended the quarter with cash and cash equivalents of $74.7 million, long-term debt of $60 million and total shareholders’ equity of $1,363.2 million.

Additionally, the company incurred capital expenditure of $83.4 million during the reported quarter and anticipates $230.6 million of capital expenditure for fiscal 2019.

Sanderson Farms, which belongs to the Food – Meat Products industry, currently carries a Zacks Rank #2 (Buy). Notably, the company has gained 5.1% in the past three months compared with the S&P 500’s growth of 4.2%.

Don’t Miss These Solid Food Picks

Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has long-term earnings per share growth rate of 12%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nomad Foods Limited (NOMD - Free Report) , with a Zacks Rank #2, has long-term earnings per share growth rate of 11%.

General Mills (GIS - Free Report) , with a Zacks Rank #2, has long-term earnings per share growth rate of 7.3%.

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