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UPDATE 3-Sanderson Farms profit tops view; shares slip
December 14, 2010 / 12:19 PM / 7 years ago

UPDATE 3-Sanderson Farms profit tops view; shares slip

* Q4 EPS $2.08 vs Wall St view $1.72

* Q4 revenue $529.1 mln vs Wall St view $521.1 mln

* Shares start higher, turn lower (Rewrites, adds analyst, details, share movement, byline)

By Bob Burgdorfer

CHICAGO, Dec 14 (Reuters) - Sanderson Farms Inc (SAFM.O) reported a much higher-than-expected quarterly profit as it sold more chicken at higher prices, but shares turned lower on concern that the industry was raising too much poultry.

Sanderson, like other chicken companies, has been increasing production, and more supplies have raised concerns that prices could come under pressure. Sanderson’s new Kinston, North Carolina, plant will start processing chickens in January.

“There is some concern about over production,” said Rich Nelson, analyst at Allendale Inc. “The (calendar) fourth quarter will not be rosy for poultry production.”

Breast meat prices, a key revenue item, were up 26 percent in the quarter that ended Oct. 31 versus a year ago, but the company said prices have declined since early September.

Poultry production increased as producers reacted to profitable prices and to ideas for better domestic and export sales in the coming year, said Nelson.

Some analysts estimate a 3 to 4 percent production increase during the first half of next year, while the USDA expects a 1.3 percent increase for all of 2011.

During the quarter, Sanderson, the No. 4 U.S. chicken producer, benefited from lower soybean meal prices, one of the primary feed ingredients.

The company said fourth-quarter earnings were $47.8 million, or $2.08 a share, up from $19.8 million, or 95 cents a share, a year earlier. Analysts on average expected $1.72 a share, according to Thomson Reuters I/B/E/S.

Sales rose 13 percent to $529.1 million, beating analysts’ expectations of $521.1 million.

Shares of Sanderson rose about 6 percent early to $44.64 in Nasdaq trading, but later were down 16 cents, or 0.4 percent, at $42.32. (Reporting by Bob Burgdorfer; Additional reporting by Renju Jose in Bangalore; Editing by Roshni Menon and Lisa Von Ahn)

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