Sanderson Farms, Inc. (SAFM) reported impressive year-over-year results for fourth-quarter fiscal 2014 (ended Oct 31, 2014) but failed to meet the estimates. The food products company’s earnings came in at $4.04 per share, soaring nearly 105.1% from $1.97 recorded in the year-ago quarter. However, the top line lagged the Zacks Consensus Estimate of $4.21 per share.
The improved year-over-year result was driven by increased demand and market prices for poultry products as well as lower grain costs, especially corn prices.
For fiscal 2014, Sanderson Farms earnings were $10.80 per share, up 90.1% from $5.68 per share in 2013, but below the Zacks Consensus Estimate of $10.97.
Revenues
Sanderson Farms’ net revenues totaled $760.9 million in the fourth quarter, increasing 4.6% year over year but were below the Zacks Consensus Estimate of $767 million. The year-over-year top-line performance was attributable to higher demand and market prices for poultry products.
For fiscal 2014, net sales amounted to $2,774.8 million, up 3.4% year over year.
Margins
Sanderson Farms' cost of sales decreased 7.4% year over year, and, as a percentage of revenue, was 76% versus 86% in the year-ago quarter. Selling, general and administrative (SG&A) expenses grew 31.2% year over year, representing 5.2% of net sales.
Operating income escalated 98.6% year over year, with a margin of 18.7% as against 9.9% for the year-ago quarter.
Balance Sheet and Cash Flow
Exiting fourth-quarter fiscal 2014, Sanderson Farms’ cash and cash equivalents were $165.6 million as against $139.3 million in the preceding quarter. Long-term debt, net of current maturities, remained stable sequentially at $10 million.
In the 12 months ended Oct 31, Sanderson Farms generated cash of $306.5 million from its operating activities, increasing 21.2% from $252.9 million generated in the prior year. Capital spending totaled $171.6 million, up significantly from $54.5 million spent in 2013.
With a market capitalization of $2 billion, Sanderson Farms currently carries a Zacks Rank #3 (Hold). Other companies worth considering in the food industry include Aramark (ARMK), Pilgrim's Pride Corporation (PPC) and JBS S.A. (JBSAY). While Aramark and Pilgrim's Pride Corporation sport a Zacks Rank #1 (Strong Buy), JBS S.A. carries a Zacks Rank #2 (Buy).
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