What to Expect from Sanderson Farms' Fiscal 4Q15 Earnings
Sales fell in fiscal 3Q15
Sanderson Farms (SAFM) delivered net sales of $739.9 million—a fall of 4% compared to fiscal 3Q14. There was a decrease in the average sales price for poultry products. The increased volume and slightly higher sales prices for prepared chicken balanced the decreased average sales price. This contributed to the fall in the revenue. For the first nine months of fiscal 2015, the reported net sales were $2,124 million—compared to $2,014 million for the first nine months of fiscal 2014. Analysts’ projection for sales in fiscal 4Q15 is $700.7 million. There will be a YoY (year-over-year) fall in the revenue growth of 7.9% if the sales are in line with analysts’ estimates.
Prices of impacted products
In its fiscal 3Q15 press release, management mentioned that the market prices for most of the products produced at Sanderson Farms’ big bird deboning plants were significantly lower during fiscal 3Q15—compared to fiscal 3Q14. The bulk leg quarter prices remained under pressure due to several factors. These factors included weak export demand impacted by export bans related to the discovery of avian influenza virus in the US, a relatively strong US dollar, and lower oil revenue in countries with oil-based economies. All of the comparisons are to fiscal 3Q14.
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The average Georgia dock price for whole chicken was ~4.5% higher.
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Boneless breast meat prices were lower by ~25.4%.
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The average market price for bulk leg quarters fell ~47.8%.
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Jumbo wing prices were higher by 29.5%.
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The company’s average feed cost per pound of poultry products processed fell by $0.09 per pound or 24.7%.
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The prices paid for corn and soybean meal, the company’s primary poultry feed ingredients, fell by 13.2% and 34.5%, respectively.
The food service traffic and demand in the US continued to improve during the third quarter. However, that demand alone wasn’t enough to keep pace with additional industry production and higher domestic supplies resulting from lower exports. As a result, the market prices for boneless breast meat remained under pressure during the quarter.
Peers’ revenue
The company’s peers like Hormel Foods (HRL), Tyson Foods (TSN), and Pilgrim’s Pride (PPC) reported revenue of $2.4 billion, $10.5 billion, and $2.1 billion for their most recently reported quarter.
Pilgrim’s Pride accounts for 5.1% and 1.0% of the portfolio holdings of the First Trust Consumer Staples Alpha DEX Fund (FXG) and the Advisor Shares TrimTabs Float Shrink ETF (TTFS).