uploads///Sanderson Farms Adjusted EPS versus Estimates

Will Sanderson Farms’ Fiscal 3Q16 Earnings Exceed Estimates?

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Earnings per share

In the previous part, we discussed the estimated revenue for Sanderson Farms (SAFM) for fiscal 3Q16 and what could drive down revenue growth. Now, let’s look at analysts’ EPS (earnings per share) estimates and management’s guidance for 2016.

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Fiscal 2016 EPS estimates

Analysts expect the company’s adjusted EPS to be $2.25 in fiscal 3Q16—compared to 3Q15 EPS of $2.27. It represents a slight fall of 1%.

In the above chart, you can see that the company beat analysts’ expectations in the first two quarters of fiscal 2016. It exceeded estimates by a huge margin of 38% in 2Q16. Earnings are expected to bounce back in the last quarter of fiscal 2016 due to lower grain prices. For fiscal 4Q16, the EPS is estimated to rise by 84%—compared to 4Q15. For fiscal 2016, analysts expect earnings to fall by 25% to $7.09—compared to an EPS of $9.5 in fiscal 2015. Management didn’t provide any guidance for earnings in fiscal 2016.

Recent dividend paid

On July 28, Sanderson Farms announced a regular quarterly cash dividend of $0.22 per share. This dividend will be paid on August 23, 2016, to shareholders of record on August 9. Sanderson Farms has a dividend yield of 0.96% as of August 18. The company’s dividend has risen at a compound annual growth rate of 7% over the past five years.

Earnings estimate for peers

Mentioned below are the performances of Sanderson Farms’ peers such as Hormel Foods (HRL), Tyson Foods (TSN), and Pilgrim’s Pride (PPC):

  • For fiscal 3Q16, Hormel Foods’ earnings rose by 29% YoY (year-over-year).
  • For fiscal 3Q16, Tyson Foods’ earnings rose by 51% YoY.
  • For fiscal 3Q16, Pilgrim’s Pride earnings are expected to fall by 5% YoY.

To gain exposure to Tyson, you can invest in iShares Morningstar Mid Core ETF (JKG) and the SPDR S&P 500 ETF Trust (SPY). They invest ~2% of their portfolio in Tyson.

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