Sanderson Farms, Inc. (SAFM) reported upbeat fiscal second-quarter 2014 (ended Apr 30, 2014) results. Earnings coming in at $2.21 per share exceeded twice the year-ago quarter figure of $1.06. Also, the bottom-line result surpassed the Zacks Consensus Estimate of $1.68 per share by 31.5%.
The improved outcome was driven by higher sales, lower grain costs and higher demand for poultry products.
Revenues
Net revenues generated were $660.7 million, up 6.4% year over year and above the Zacks Consensus Estimate of $630 million. Revenues were boosted by high demand for poultry products, offset partially by lower market prices.
Costs/Margins
Sanderson Farms’ cost of goods sold declined 1.8% year over year and represented 83.6% of net sales, down from 90.5% in the prior-year quarter. Gross margin was 16.4%, up compared with 9.5% reported in the year-ago quarter.
Selling, general and administrative expenses, as a percentage of total revenue, were at 4.5%, up 130 basis points year over year.
Balance Sheet/Cash Flow
Exiting fiscal second-quarter 2014, Sanderson Farms’ cash and cash equivalents were $84.4 million, up 43.5% from $58.8 million in the preceding quarter. Long-term debt, net of current maturities, stood at $10.0 million versus $29.2 million recorded in the previous quarter.
Sanderson Farms generated $80.7 million cash from its operating activities, up from $40.4 million recorded in the year-ago quarter. Capital expenditure surged 128.3% year over year to $66.0 million. Dividend paid totalled $4.6 million.
Sanderson Farms is a $2.0 billion integrated poultry processing company. It engages in the production, processing, marketing and distribution of fresh and frozen chicken products in the U.S.
The company currently sports a Zacks Rank #1 (Strong Buy). Some other companies worth considering in the industry include Pilgrim's Pride Corp. (PPC), JBS S.A. (JBSAY) and The WhiteWave Foods Co. (WWAV). While Pilgrim's Pride sports the same Zacks rank as Sanderson Farms, both JBS and The WhiteWave Foods carry a Zacks Rank #2 (Buy).
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