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Category: Sanderson Farms (SAFM)
Date: 17 December 2020 Stock price of Sanderson Farms: $139.96 We take a look at the 4th quarter 2020 earnings report of Sanderson Farms, one of the largest poultry producers in the United States. The group reported net sales of $940 million and net income of $27.9 million
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Over the course of the fourth quarter and fiscal year ended October 31, 2020, our company and industry faced extraordinary challenges caused by the COVID-19 pandemic and the unprecedented social and economic impact the virus continues to have on the United States - Joe F. Sanderson, chairman and chief executive officer of Sanderson Farms, Inc."
More About Sanderson Farms
Sanderson Farms has grown from a small general feed and seed business in 1947 to one of the nation's leading food corporations in fiscal 2018, with sales of more than $3.23 billion. We are currently the third largest poultry producer in the U.S., processing over 4.4 billion pounds of meat in fiscal 2018.
Our state-of-the-art facilities provide us the capacity to process more than 13.3 million chickens per week. We currently operate 13 poultry plants and one further processing facility, with our newest complex located in Smith and Wood Counties, Texas, which opened in January 2019 and includes a new feed mill, hatchery, poultry processing plant and waste water treatment facility.
Together these facilities comprise a state-of-the-art poultry complex with the capacity to process 1.3 million birds per week for retail chill pack customers. At full capacity, the complex will employ approximately 1,700 people, will require 80 contract growers, and will be equipped to process and sell approximately 375 million pounds of dressed poultry meat annually, thereby providing more quality products for new customers, opportunities for our employees and, above all, value for our shareholders. Combined with our company-owned feed mills and hatcheries, we are well positioned to keep up with the growing demand for our products.
Our 15,000+ employees and over 1,000 independent growers are committed to offering our customers the very best products on the market today. Perhaps that's why the products produced by Sanderson Farms can be found in major markets throughout the country as well as overseas. Sanderson Farms was incorporated in Mississippi in 1955 as a fully integrated poultry processing company that produces, processes, markets and distributes fresh and frozen chicken products. Our stock became publicly traded in May 1987 and is listed on NASDAQ under the symbol SAFM.
Today, the Company continues to build upon its rich traditions, believing that our success is largely due to the values instilled by the tenacious efforts of our founders and our extended family of employees. This includes the tradition of providing quality products to our customers and being responsive to their diverse needs, a hallmark of our business for over 70 years.
Our state-of-the-art facilities provide us the capacity to process more than 13.3 million chickens per week. We currently operate 13 poultry plants and one further processing facility, with our newest complex located in Smith and Wood Counties, Texas, which opened in January 2019 and includes a new feed mill, hatchery, poultry processing plant and waste water treatment facility.
Together these facilities comprise a state-of-the-art poultry complex with the capacity to process 1.3 million birds per week for retail chill pack customers. At full capacity, the complex will employ approximately 1,700 people, will require 80 contract growers, and will be equipped to process and sell approximately 375 million pounds of dressed poultry meat annually, thereby providing more quality products for new customers, opportunities for our employees and, above all, value for our shareholders. Combined with our company-owned feed mills and hatcheries, we are well positioned to keep up with the growing demand for our products.
Our 15,000+ employees and over 1,000 independent growers are committed to offering our customers the very best products on the market today. Perhaps that's why the products produced by Sanderson Farms can be found in major markets throughout the country as well as overseas. Sanderson Farms was incorporated in Mississippi in 1955 as a fully integrated poultry processing company that produces, processes, markets and distributes fresh and frozen chicken products. Our stock became publicly traded in May 1987 and is listed on NASDAQ under the symbol SAFM.
Today, the Company continues to build upon its rich traditions, believing that our success is largely due to the values instilled by the tenacious efforts of our founders and our extended family of employees. This includes the tradition of providing quality products to our customers and being responsive to their diverse needs, a hallmark of our business for over 70 years.
Overview of Sanderson Farms 4th quarter 2020 earnings report
- Net sales: $ 940.023 million
- Cost and expenses: $897.768 million
- Net income:$ 27.922 million
- Net profit margin: 2.97%
- Net profit margin: 2.97%
- Diluted earnings per share: $1.26
- PE ratio of Sanderson Farms
- Shares in issue: 22.16
- Dividend declared: $0.44
- Dividend yield of Sanderson Farms: 1.25%
- Dividend yield of Sanderson Farms: 1.25%
- Stockholders equity in Sanderson Farms: $1.419 billion
- Stockholders equity per share in Sanderson Farms: $64.03
- So Sanderson Farms is trading at 2.18 its stockholders equity per share, which is outside the expected range of between 2 and 5 times that most firms tend to trade at.
- For some perspective firms in the S&P 500 trade at an average of 3.9 times its stockholders equity
Sanderson Farms (SAFM) management commentary on their 4th quarter 2020 earnings report
LAUREL, Miss.--(BUSINESS WIRE)--Dec. 17, 2020-- Sanderson Farms, Inc. (NASDAQ: SAFM) today reported results for the fourth quarter and fiscal year ended October 31, 2020.
Net sales for the fourth quarter of fiscal 2020 were $940.0 million compared with $906.5 million for the same period a year ago. For the quarter, the Company reported net income of $27.9 million, or $1.26 per share, compared with a net loss of $22.9 million, or $1.05 per share, for the fourth quarter of fiscal 2019. Net sales for fiscal 2020 were $3.564 billion compared with $3.440 billion for fiscal 2019. Net income for the fiscal year totaled $28.3 million, or $1.27 per share, compared with net income of $53.3 million, or $2.41 per share, for last fiscal year.
“Over the course of the fourth quarter and fiscal year ended October 31, 2020, our company and industry faced extraordinary challenges caused by the COVID-19 pandemic and the unprecedented social and economic impact the virus continues to have on the United States,” said Joe F. Sanderson, chairman and chief executive officer of Sanderson Farms, Inc.
“Through our diligent efforts to implement protocols designed to keep our teams and communities safe, and our ability to shift our production to the highest demand areas, our operations have continued to perform well and have helped to feed American families and maintain the U.S. food supply during the pandemic. I must thank our employees, our contract poultry producers, our customers, our vendors, the consumers who buy our products and the communities and states in which we operate for their hard work, dedication and perseverance during these unprecedented times. I am so very grateful for everyone associated with Sanderson Farms for rising to the challenges of 2020.
“While demand from our food service customers has remained under pressure, demand for chicken products sold to retail grocery store customers remained strong through the end of the fiscal year. We believe these conditions will continue until consumers return to restaurants and resume dining away from home in large numbers. Therefore, we are continuing to shift our production toward the tray packs that are in high demand in the retail grocery market.” Sanderson continued, “We are confident in our ability to continue to execute our organic growth strategy and enhance value for our shareholders and other stakeholders. As such, our Board of Directors recently increased our cash dividend and extended our share repurchase plan. “For the fiscal year, we reported record volume of poultry products sold of 4.81 billion pounds, compared to 4.53 billion pounds in fiscal 2019. Grain prices were slightly lower during fiscal 2020 compared with prices paid in fiscal 2019, and feed costs in processed flocks were lower by 3.4 percent.”
According to Sanderson, overall realized prices for poultry products were 0.4 percent lower in fiscal 2020 compared with prices last year. Boneless breast meat market prices averaged 2.8 percent higher in the fourth quarter than the prior-year period. For the full fiscal year, boneless breast meat market prices were 4.3 percent lower compared with fiscal 2019. Jumbo wing market prices averaged $1.89 per pound during the fourth quarter of fiscal 2020, up 9.0 percent from the average of $1.73 per pound during the prior-year period. Jumbo wing market prices averaged $1.61 per pound during the fiscal year, down 6.6 percent from the average of $1.72 per pound for fiscal 2019. The average market price for bulk leg quarters decreased approximately 42.8 percent for the fourth fiscal quarter of 2020 compared with the fourth fiscal quarter of 2019, and decreased 20.6 percent for fiscal 2020 compared to fiscal 2019. Cash prices for corn during the fourth fiscal quarter decreased by 15.2 percent, while soybean meal cash prices were higher by 4.7 percent. For the full fiscal year, cash corn prices were lower by 3.8 percent, and soymeal cash prices were lower by 0.5 percent when compared to fiscal 2019.
Net sales for the fourth quarter of fiscal 2020 were $940.0 million compared with $906.5 million for the same period a year ago. For the quarter, the Company reported net income of $27.9 million, or $1.26 per share, compared with a net loss of $22.9 million, or $1.05 per share, for the fourth quarter of fiscal 2019. Net sales for fiscal 2020 were $3.564 billion compared with $3.440 billion for fiscal 2019. Net income for the fiscal year totaled $28.3 million, or $1.27 per share, compared with net income of $53.3 million, or $2.41 per share, for last fiscal year.
“Over the course of the fourth quarter and fiscal year ended October 31, 2020, our company and industry faced extraordinary challenges caused by the COVID-19 pandemic and the unprecedented social and economic impact the virus continues to have on the United States,” said Joe F. Sanderson, chairman and chief executive officer of Sanderson Farms, Inc.
“Through our diligent efforts to implement protocols designed to keep our teams and communities safe, and our ability to shift our production to the highest demand areas, our operations have continued to perform well and have helped to feed American families and maintain the U.S. food supply during the pandemic. I must thank our employees, our contract poultry producers, our customers, our vendors, the consumers who buy our products and the communities and states in which we operate for their hard work, dedication and perseverance during these unprecedented times. I am so very grateful for everyone associated with Sanderson Farms for rising to the challenges of 2020.
“While demand from our food service customers has remained under pressure, demand for chicken products sold to retail grocery store customers remained strong through the end of the fiscal year. We believe these conditions will continue until consumers return to restaurants and resume dining away from home in large numbers. Therefore, we are continuing to shift our production toward the tray packs that are in high demand in the retail grocery market.” Sanderson continued, “We are confident in our ability to continue to execute our organic growth strategy and enhance value for our shareholders and other stakeholders. As such, our Board of Directors recently increased our cash dividend and extended our share repurchase plan. “For the fiscal year, we reported record volume of poultry products sold of 4.81 billion pounds, compared to 4.53 billion pounds in fiscal 2019. Grain prices were slightly lower during fiscal 2020 compared with prices paid in fiscal 2019, and feed costs in processed flocks were lower by 3.4 percent.”
According to Sanderson, overall realized prices for poultry products were 0.4 percent lower in fiscal 2020 compared with prices last year. Boneless breast meat market prices averaged 2.8 percent higher in the fourth quarter than the prior-year period. For the full fiscal year, boneless breast meat market prices were 4.3 percent lower compared with fiscal 2019. Jumbo wing market prices averaged $1.89 per pound during the fourth quarter of fiscal 2020, up 9.0 percent from the average of $1.73 per pound during the prior-year period. Jumbo wing market prices averaged $1.61 per pound during the fiscal year, down 6.6 percent from the average of $1.72 per pound for fiscal 2019. The average market price for bulk leg quarters decreased approximately 42.8 percent for the fourth fiscal quarter of 2020 compared with the fourth fiscal quarter of 2019, and decreased 20.6 percent for fiscal 2020 compared to fiscal 2019. Cash prices for corn during the fourth fiscal quarter decreased by 15.2 percent, while soybean meal cash prices were higher by 4.7 percent. For the full fiscal year, cash corn prices were lower by 3.8 percent, and soymeal cash prices were lower by 0.5 percent when compared to fiscal 2019.
“Prices paid for feed grain during fiscal 2020 were lower when compared to fiscal 2019, representing the eighth straight year of relatively flat or lower grain costs. However, we expect feed grain costs to increase in fiscal 2021. The USDA has lowered 2020 corn and soybean crop yield estimates and has increased its estimate of export demand. As a result, market prices for both corn and soybeans have moved significantly higher since September. If we priced all our remaining fiscal 2021 feed grain needs at current prices, costs for corn and soybean meal during fiscal 2021 would be $193.2 million higher than during fiscal 2020, based on fiscal 2020 volumes.
However, we have priced only one week’s supply of our January soybean meal needs and have not priced any other grain needs past December 31, 2020. “As of October 31, 2020, our balance sheet reflected $1.85 billion in assets, stockholders’ equity of $1.42 billion and net working capital of $354.0 million. We believe our balance sheet provides us with the financial strength to both support our organic growth strategy and consistently manage our operations through the cycles that characterize our industry. We continue to evaluate a new site as part of our next phase of organic growth, and we hope to be in a position to announce the location and begin work on a new poultry complex during the first half of calendar 2021,” Sanderson concluded
However, we have priced only one week’s supply of our January soybean meal needs and have not priced any other grain needs past December 31, 2020. “As of October 31, 2020, our balance sheet reflected $1.85 billion in assets, stockholders’ equity of $1.42 billion and net working capital of $354.0 million. We believe our balance sheet provides us with the financial strength to both support our organic growth strategy and consistently manage our operations through the cycles that characterize our industry. We continue to evaluate a new site as part of our next phase of organic growth, and we hope to be in a position to announce the location and begin work on a new poultry complex during the first half of calendar 2021,” Sanderson concluded
Sanderson Farms (SAFM) stock price history over the last 5 years
The image below, obtained from Google shows the stock price history of The BrightView (BV) for the last 5 years and it's been a pretty good time for BrightView stockholders over the last 5 years. 5 years ago the stock was trading at $130 and its currently trading at $272. That's a very strong return of 109% provided to BrightView stockholders over the last 5 years.
The stock of BrightView is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of The BrightView stock is very positive at this point in time.
The stock of BrightView is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of The BrightView stock is very positive at this point in time.
Latest stock valuation of Sanderson Farms (SAFM)
So what is Sanderson Farms stock worth based on their 4th quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Sanderson Farms at $157.50 a stock.
We therefore believe the stock of Sanderson Farms is undervalued at its current price of $139.96
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $157.50, thus a good entry point into Sanderson Farms would be at $141.80 or below.
We expect the stock of Sanderson Farms to kick up from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is undervalued. Since the stock of Sanderson Farms is trading at below our suggested entry point into the stock we rate the stock of Sanderson Farms as buy
We therefore believe the stock of Sanderson Farms is undervalued at its current price of $139.96
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $157.50, thus a good entry point into Sanderson Farms would be at $141.80 or below.
We expect the stock of Sanderson Farms to kick up from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is undervalued. Since the stock of Sanderson Farms is trading at below our suggested entry point into the stock we rate the stock of Sanderson Farms as buy
Next earnings release of Sanderson Farms (SAFM)
It is expected that Sanderson Farms (SAFM) will release their 1st quarter 2021 earnings report
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