Yahoo Finance Sanderson Farms' (SAFM) Loss Wider Than Estimates in Q2
Sanderson Farms, Inc. SAFM posted wider-than-expected loss when it reported second-quarter fiscal 2020 results. Moreover, the top line missed the Zacks Consensus Estimate.
During the fiscal second quarter, boneless breast meat market prices declined nearly 18% year over year. Moreover, average market price for bulk leg quarters and jumbo wing prices were lower by 7.8% and 23.1%, respectively.Meanwhile, Sanderson Farms witnessed a significant shift in consumer demand from food service to retail grocery store consumers amid the coronavirus crisis.
Q2 in Detail
The company reported net loss of $1.43 per share, which was wider than the Zacks Consensus Estimate of a loss of 80 cents. Sanderson Farms had reported earnings of $1.83 per share in the year-ago quarter.
Net sales came in at $844.7 million, which missed the Zacks Consensus Estimate of $872 million. The metric came in at $845.2 million in the year-ago quarter.
Sanderson Farms, Inc. Price, Consensus and EPS Surprise
Sanderson Farms, Inc. price-consensus-eps-surprise-chart | Sanderson Farms, Inc. Quote
Costs/Margins
Cost of sales increased 12.4% to $832.3 million. Average feed costs per pound for poultry products inched down 1.1%. Costs of corn meal increased 2.8%, while costs of soybean meal declined 1.3% in the quarter. Soybean meal and corn are part of the company’s primary feed ingredients. Further, SG&A expenses rose 14.2% to $56.2 million in the reported quarter.
Balance Sheet/Cash Flow
Sanderson Farms ended the quarter with cash and cash equivalents of $61.3 million, long-term debt of $200 million and total shareholders’ equity of $1,371.4 million.
Outlook
Per the current USDA projections, broiler production in the industry during calendar year 2020 is expected to decline 0.3% from 2019 levels. The downside will be caused by the coronavirus outbreak and its adverse impacts on food service demand. In this regard, the company is likely to take certain planned production cuts at its food service units for the remaining half of fiscal 2020. Notably, management expects total production during the fiscal third and the fiscal fourth quarters to be up 2.2% and down 5%, respectively.
Apart from these, the company has been incurring increased operating costs related to higher employee expenses amid the COVID-19 outbreak. Notably, reduced production along with increased operating costs is likely to persist until situations induced by the coronavirus pandemic improve. Nevertheless, management anticipates feed grain costs to decline year over year for the remaining half of fiscal 2020.
Price Performance
Notably, shares of this Zacks Rank #3 (Hold) company have declined 5.9% in the past year against the industry’s growth of 1.8%.
Solid Staple Bets
General Mills, Inc. GIS, with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 7.5%.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conagra Brands Inc. CAG, with a Zacks Rank #2, has a long-term earnings growth rate of 7%.
The Kraft Heinz Company KHC, with a Zacks Rank #2, has a long-term earnings growth rate of 6%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Conagra Brands Inc. (CAG) : Free Stock Analysis Report
General Mills, Inc. (GIS) : Free Stock Analysis Report
Sanderson Farms, Inc. (SAFM) : Free Stock Analysis Report
The Kraft Heinz Company (KHC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
