Sanderson Farms Inc. (SAFM) is benefiting from lower costs in its feed supplies, enabling the company to more than triple its second-quarter income from last year. Analysts are bullish, with the next-year estimate projecting 25% earnings growth.

Company Description

Sanderson Farms, Inc. is an integrated poultry processing company that operates in the United States. The company was founded in 1947 and has a market cap of $966 million.

Second-Quarter Results

Sanderson Farms’ share price received a nice boost on May 28 when the company reported strong second-quarter results that were ahead of expectations.

Sales were down 2% from last year to $426.8 million, but income spiked, jumping to $26.2 million from $6.2 million last year. Earnings came in at $1.27 per share, well ahead of the consensus of 58 cents.

Lower Costs Drive Income

The company noted that lower costs of feed supplies drove its income growth, with prices of corn and soybean meal down 23% and 14% from last year respectively.

Sanderson also said the industry has scaled back on its production in order to constrict supplies and keep prices elevated.

Estimates Surge

Even before the solid quarter hit the Street, analyst were upgrading their earnings estimates. The current-year estimate is up $1.17 in the last 30 days to $3.52 per share. The next-year estimate is up to, pegged at $4.38, a robust 25% growth projection.

The Chart

Shares of SAFM have been rallying since bottoming out just above $20 in late November of last year. More recently, shares have surged back to within striking distance of the 52-week high on the good quarter. Take a look at the chart below.

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