Tuesday, September 7, 2010

Sanderson Farms (Nasdaq:SAFM) Upgraded by Argus to "Buy"

Argus upgraded Sanderson Farms (Nasdaq:SAFM) from "Hold" to "Buy," a couple of weeks after they missed their quarterly earnings estimates.

Earnings per share for the last quarter came in at $489 million, or $1.55 a share. Analysts had been looking for $514 million, or $1.87 a share.

Sanderson has plummeted since June 15, when they stood at $53.89 a share, to today, where they closed at $43.46.

Some factors which have caused concerns have been rising feed costs and supply.

Warm weather largely caused the problems last quarter, where the chickens weren't able to gain the usual weight, which cut into the revenue and earnings, as shown by the results.

Expectations are feed prices should fall in 2011, which could help the company immensely, and supply should be back on target, assuming the weather is back to normal.

Prices at this time are expected to remain high for their product, so that should be able to help them overcome the higher feed costs until they drop next year.

The Russian market is opening up again for them, where premium prices are expected to continue.

While the weight of the chickens were lower, that created a tighter supply, which is behind the better pricing in the market. So the weight worked for and against them in that sense, with less weight to sell but better prices because of it.

Demand from the food service industry continues to weigh on the company as well, with that being a key part of the near term outlook.

Pricing is expected to hold at minimum through September, helping the company for next quarter's results.

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