Will Sanderson Farms' (SAFM) Earnings Fall Again In Q4?

Sanderson Farms, Inc. (NASDAQ:SAFM) is scheduled to report fourth-quarter fiscal 2018 results on Dec 20, before the opening bell. In the trailing four quarters, this Food - Meat Products player’s bottom line has underperformed the Zacks Consensus Estimate by an average of 26.5%. Also, it delivered a negative earnings surprise of 46.3% in the last reported quarter. Let’s see what awaits this quarterly release.

How are Estimates Faring?

The Zacks Consensus Estimate for the quarter under review is pegged at $1.09, significantly lower than $3.20 per share reported in the year-ago quarter. Notably, the estimates have been stable over the past 30 days. For revenues, the consensus estimate is pegged at $792.8 million, down approximately 14% from the year-ago recorded number.

Sanderson Farms, Inc. Price, Consensus and EPS Surprise

Key Factors

Sanderson Farms is grappling with lower average selling prices as well as increased costs of sales. In fact, lower average sales price also caused poultry products net sales to tumble 11% in the fiscal third quarter. Apart from this, management expects pounds processed during the fourth fiscal quarter to be around 1.1 billion pounds, down 4.6% year over year.

Moreover, the company is seeing increased freight costs for the past few quarters, including the last reported quarter. A rise in freight and ship costs along with increased grower pay and escalated costs associated with antimicrobial interventions in the plant led to a rise in non-feed costs of the company in the fiscal third quarter. Persistence of this trend may affect the company’s bottom line in the quarter to be reported as well. Many other companies such as General Mills (NYSE:GIS) , Conagra Brands (NYSE:CAG) and Campbell Soup (NYSE:CPB) are bearing the brunt of higher freight cost.

Sanderson Farms has, however, been strengthening its product portfolio by adding to its vast product pipeline. The company is known for its processed and prepared chicken products available in varied sizes that are also sold in foreign markets namely Mexico, Middle East and Central Asia. This has been leading to an increase in export sales.

What the Zacks Model Unveils

Our proven model does not conclusively show that Sanderson Farms is likely to beat earnings estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Sanderson Farms has a Zacks Rank #4 (Sell) and its Earnings ESP of 0.00% makes surprise prediction difficult.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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