UPDATE 4-Sanderson quarterly profit surges, shares rise
* Q2 EPS $1.27 vs Wall St view $0.54
* Q2 rev $426.8 mln vs $433.9 mln year earlier
* Sanderson shares up 4 pct; Tyson also rises (Recasts, adds share rise, company comments)
CHICAGO, May 28 (Reuters) - Sanderson Farms Inc (SAFM.O) posted a much larger-than-expected quarterly profit on Thursday and said that profits in May should top April's as lower feed costs and strong grocery sales continue to help results.
In reaction, Sanderson's shares reached a nearly one-year high, and shares of larger rival chicken producers Tyson Foods Inc (TSN.N) and Pilgrim's Pride Corp (PGPDQ.PK) also rose.
Sanderson's higher earnings came despite weak demand from restaurants, which account for about half of its sales, as recession-weary consumers ate at home.
For the second quarter ended April 30, the Laurel, Mississippi-based company reported a profit of $26.2 million, or $1.27 per share, up from $6.2 million, or 30 cents a share, a year earlier.
Wall Street analysts on average were expecting 54 cents per share, according to Reuters Estimates.
Sanderson's revenue declined to $426.8 million from $433.9 million due to production cuts.
PRODUCTION CUTS KEY TO PROFITS
JPMorgan analyst Ken Goldman called the results "very strong" and said the operating margins were the best since July 2007. Stephens Inc analyst Farha Aslam also called the results strong and has a $50 price target on the stock, which is currently trading at about $43.
"Much of the market improvement is due to production cuts and resulting reduced supply of chicken in the market," Chief Executive Joe Sanderson Jr said in a statement.
Chicken companies reduced production in late 2008 and in 2009 to cope with weak demand amid the recession and higher feed costs.
During a conference call with Wall Street analysts, Sanderson said production increased at the company's new Waco, Texas, plant, while a few plants were still below capacity.
"Demand for chicken at retail grocery stores remains strong, and the export market improved compared to our first quarter," Sanderson said. Continued...
