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Sanderson Farms Shares Fall On Analyst Downgrade

The Associated Press

MILWAUKEE (AP) — Shares of Sanderson Farms Inc. tumbled on Tuesday after an analyst downgraded the stock, saying he continued to look positively on the chicken producer but the stock had to be downgraded after it passed his price target.

Shares fell $2.29, or 5.6 percent, to $38.68 in morning trading Tuesday.

JPMorgan analyst Ken Goldman lowered his rating on the Laurel, Miss.-based company to "neutral" from "overweight" after it hit his price target of $38. He told clients in a note the move was mainly related to valuation.

"We continue to look positively upon Sanderson's fundamentals and think that profitability is on the immediate horizon," he wrote. "However, following the stock's recent upswing, we now believe that potential risks and rewards are balanced."

The company's stock has soared after its low of $20.24 in November, and Goldman said the boost in share price was warranted as conditions in the industry improved.

Meat makers have been hurting as they work through ingredient prices that reached record highs last summer. A glut of meat on the market kept prices down, but production cuts are helping restore prices.

Goldman said there are still risks to the industry, including weak demand, production that could increase — and hurt prices— and renewed threats by Russia of cutting off all imports.

He said given that, "it's prudent to take a less aggressive stance" on the stock.

Goldman cut his fiscal 2009 earnings per share estimate to $1.60 from $2.02 and his fiscal 2010 estimate to $2.37 per share from $3.48.

According to Thomson Reuters, analysts on average predict the company earns $2.44 in fiscal 2009 and $3.66 in fiscal 2010.