Sanderson Farms Q4 Earnings: Chickens Come Home to Roost

Mid cap poultry processing stock Sanderson Farms, Inc (NASDAQ: SAFM) reported fiscal Q4 2017 earnings before the market opened on Thursday with shares falling off on weaker-than-expected Q4 profits that were impacted by weak poultry prices, hurricane disruptions and higher-than-expected chicken production. Q4 net sales were $919.9 million versus $790.8 million and net income was $72.9 million versus net income of $76.0 million. For the full year, net sales were $3.342 billion versus $2.816 billion and net income was $279.7 million versus net income of $189.0 million. The Chairman/CEO made extensive comments about performance and the poultry market:

"The fourth quarter marked the end of another record year for Sanderson Farms. Market conditions weakened during our fourth fiscal quarter of 2017, as market prices declined seasonally after Labor Day. The seasonal decrease in demand was exacerbated by hurricane disruptions and higher than expected chicken production caused by higher than expected live weights. Despite this weakness, we performed well during the quarter.

"For the fiscal year, we reported record annual sales, with improved overall poultry market prices compared with fiscal 2016, and higher volume of poultry products sold by 13.2 percent. Grain prices were slightly higher during fiscal 2017 compared with prices paid in fiscal 2016; however, feed costs in processed flocks were lower per pound on improved live bird performance. For fiscal 2017, we sold 4.22 billion pounds of dressed poultry, another record, compared with 3.73 billion pounds in fiscal 2016."

"We are pleased that our profitability during fiscal 2017 allowed us to fund from cash on hand the completion of our new facilities in St. Pauls, North Carolina, start construction at our new complex in Tyler, Texas, strengthen our balance sheet, and reward our shareholders with a special dividend. We are well positioned to continue our growth strategy as we move St. Pauls to full production during fiscal 2018 and continue construction of our new complex in Tyler.”

"As of October 31, 2017, our balance sheet reflected $1.733 billion in assets, stockholders' equity of $1.433 billion and net working capital of $650.8 million. We had no debt at fiscal year-end. We believe our balance sheet provides us with the financial strength not only to support our growth strategy, but also to consistently manage our operations through the cycles that characterize our industry. We deeply appreciate the hard work and dedication to excellence of our employees, growers and everyone associated with our company,"

A technical chart for Sanderson Farms shows shares having a good run since last spring:

A long term performance chart shows shares of mid cap Sanderson Farms more than doubling in value while large cap Tyson Foods, Inc (NYSE: TSN) has more than tripled in value and mid cap Pilgrim's Pride Corporation (NASDAQ: PPC) has quadrupled in value:

Finally, here is a quick recap of small cap Sanderson Farms’ recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page going into the current earnings report:

Earnings History10/30/20161/30/20174/29/20177/30/2017
EPS Est. 2.66 1.18 2.72 4.49
EPS Actual 3.36 1.02 2.94 5.09
Difference 0.7 -0.16 0.22 0.6
Surprise % 26.30% -13.60% 8.10% 13.40%
EPS TrendCurrent Qtr. (Oct 2017)Next Qtr. (Jan 2018)Current Year (2017)Next Year (2018)
Current Estimate 3.5 1.64 12.59 11.51
7 Days Ago 3.5 1.64 12.59 11.51
30 Days Ago 3.6 1.74 12.67 11.55
60 Days Ago 3.65 1.7 12.72 11.55
90 Days Ago 3.71 1.69 12.8 11.76