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Why Has Sanderson Farms’ Stock Gained in 2016?

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Stock appreciated so far in 2016

Sanderson Farms, based in Laurel, Mississippi, is an integrated poultry processing company. It produces, processes, markets, and distributes fresh, frozen, and prepared chicken products in the US. It will release its fiscal 3Q16 earnings ending July 31, 2016, on August 25 after the Market opens.

So far, the company showed tremendous growth in its stock price in 2016. The company’s stock appreciated 25% as of August 18. The stock also gained 5% since its fiscal 2Q16 results reported on May 26. The stock rose 3% on the same day with earnings and revenue beating estimates.

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The stock almost touched $100 in 2014, aided by strong chicken prices and lower feed grain costs. It fell ~7% in calendar 2015 due to the outbreak of avian influenza in the meat industry. Sanderson Farms outperformed the Market represented by the S&P 500 Index by 16% as of August 18. It closed at $93.69.

Peers’ stock performances

So far in 2016, most of the company’s peers in the industry have also shown stock price appreciation.

  • Pilgrim’s Pride (PPC) has returned 7%.
  • Tyson Foods (TSN) has returned 42%.
  • Hormel Foods (HRL) has returned -5%.

Pilgrim’s Pride, Tyson, and Hormel closed trade at $23.4, $75.03, and $37.04, respectively, on August 18, 2016.

The Guggenheim S&P 500 Equal Weight Consumer Staples ETF (RHS) invests 3.3% of its portfolio in Tyson Foods. The Consumer Staples Select Sector SPDR Fund (XLP) invests in Hormel Foods.

What’s in this series?

With Sanderson Farms’ fiscal 3Q16 earnings release due next week, we’ll discuss what investors can expect in the earnings release. We’ll cover analysts’ revenue estimates, revenue growth drivers, earnings per share estimates, and the recent dividend announced. Finally, we’ll look at the company’s expected stock price over the next 12 months.

Let’s start with a quick recap of its performance last quarter.

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