Sanderson Farms Tops 3Q Sales Spurred By Retail Demand

Sanderson Farms topped 3Q estimates despite restaurant closures amid the coronavirus pandemic. The poultry producer benefited from increased demand by retail grocery store customers.

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Sanderson Farms (SAFM) delivered upbeat 3Q results (ending July 31), wherein its adjusted earnings of $1.48 per share came way ahead of Street estimates of $0.95 per share. However, 3Q earnings fell 38.6% year-over-year, due to restaurant closures amid the pandemic, which severely dented its food-service business. Revenues of $956.5 million exceeded the consensus estimate of $936 million and grew 1.2% year-over-year.

Sanderson’s Joe F. Sanderson pointed out that 3Q results “reflect extreme market volatility for products sold to food service customers.” However, the company witnessed “continued strong demand for products sold to retail grocery store customers” as consumers started preparing more meals at home amid the pandemic. (See SAFM stock analysis on TipRanks).

Ahead of the 3Q results, Cleveland Research analyst Michael Piken said that he expects Sanderson to report a “sizable” earnings miss for 3Q. Piken expects prices to stay lower due to the “slower than expected export demand and greater than expected product availability.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 3 Buys and 2 Holds. The average price target of $130.75 implies upside potential of about 8.4%, with shares down about 34% year-to-date.