Sanderson Farms announced earnings Friday morning that are nearly double what Wall Street was expecting, as the rising cost of feed seems not be impacting the country's third largest chicken producer.
Sanderson Farms Earnings
Estimates: Analysts expected Sanderson Farms to earn around $7.60 per share. Revenue was thought to come in at $1.4 billion. In its first quarter, Sanderson Farms reported $8.64 per share and $1.33 billion in revenue.
Results: Sanderson Farms earnings per share ballooned 231% vs a year earlier to $14.39. Revenue increased 36% to $1.54 billion.
Sanderson Farms Stock
Sanderson Farms stock rose 2.8% to 200 in the stock market today. Shares have rebounded from the 50-day and 200-day lines in recent days after sinking to 183.84 on May 5. SAFM stock is just in range from a 192.72 flat-base buy point.
Sanderson Farms stock has a 99 Composite Rating. Its EPS Rating is 81.
Pilgrim's Pride advanced 2.3%, continuing to hit new highs. Tyson Foods climbed 1.4%, back above its 50-day line.
Counting Your Chickens
Sanderson Farms along with Tyson Foods, Pilgrim's Pride and Perdue Farms produce more than half of the country's chicken and poultry. Despite supply chain concerns and skyrocketing feed prices, Sanderson Farms stock has performed well in recent days, but it's in the midst of being acquired.
Pilgrim's Pride stock has reached a two-year high breaking through a buy range this week.
Rising feed costs have been a concern. So far shoppers have been willing to pay higher prices for food overall and meat specifically. Tyson Foods noted in its earnings report earlier this month.
The consumer price index has shown record increases for chicken and seafood. Food prices overall increased 9.4% in April, the largest year-over-year gain since 1981, according to federal data.
Sanderson Farms' strong quarterly earnings and revenue is another indication that consumers are not yet pushing back on price hikes, squeezing margins.
Along with inflation, Sanderson Farms is grappling with the delayed deal that would have seen it incorporated into Cargill, Continental Grain Company.
Stalled Acquisition
In the summer of 2021, Cargill, Continental Grain Company, announced it had agreed to acquire Sanderson Farms for $4.53 billion, or $203 a share cash. Under the agreement, Sanderson Farms would combine with Wayne Farms, a subsidiary of Continental Grain, to form a new, privately held poultry business.
The deal was expected to be finalized in late 2021, but months later has still not been completed.
In December, the Justice Department made a second request for information about the deal, as it continued its antitrust review. In March, the DOJ appeared ready to oppose the deal without changes to the terms, CNBC reported.
This delayed merger deal raises uncertainty for Sanderson Farms. If the deal looks set to close, SAFM stock will like move close to its $203 purchase price. If the takeover falls apart, Sanderson Farms could sell off.
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