Zacks Investment Research downgraded Sanderson Farms, Inc. (SAFM) to a Zacks Rank #5 (Strong Sell) on Jan 14, 2014.
Why the Downgrade?
Sanderson Farms reported its fourth quarter and fiscal year 2013 (ended Oct 2013) results on Dec 17, 2013. Earnings per share in the fourth quarter were $1.97, down 15.8% from the Zacks Consensus Estimate of $2.34.
The company reported a 3.5% year-over-year increase in its expenses. Cost of sales in the quarter increased 2.0% and represented 86.0% of total revenue. Selling, general and administrative expenses, at 4.2% of total revenue, grew 49.3% year-over-year in the quarter. Income tax expense increased significantly and stood at $26.0 million.
Spiraling expenses have affected Sanderson Farms’ financials adversely in fiscal 2013. Rising costs need to be controlled before it delves a major blow to the company.
In the last 30 days, the Zacks Consensus Estimate for Sanderson Farms has decreased 11.9% to $5.95 for fiscal 2014 (ending Oct 2014). This along with a negative average earnings surprise of 81.0% in the trailing four quarters raises our concern over the company’s performance in the quarters ahead.
Other Stocks to Consider
Sanderson Farms is a $1.7 billion integrated poultry processing company. The company is engaged in the production, processing, marketing and distribution of fresh and frozen chicken products.
Some better-ranked stocks in the industry include Amira Nature Foods Ltd. (ANFI), Hormel Foods Corp. (HRL) and The WhiteWave Foods Co. (WWAV). All the three companies carry a Zacks Rank #2 (Buy).
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