KeyBanc Starts Coverage Of Tyson, Sanderson Farms

"We think sentiment and valuation for these stocks is already starting to turn," Jagdale wrote. "As such, we would rather get in now, when valuations are reasonable, and risk being early rather than miss out on the upside."

KeyBanc rates Laurel, Miss.-based Sanderson Farms higher than Tyson since it is considered the lowest-cost producer, has higher margins than its peers, is gaining market share and has a conservative balance sheet.

Jagdale said Springdale, Ark.-based Tyson's chicken segment has bottomed out but "we do not have good visibility into the timing of a potential turnaround." Poor performance in the company's chicken segment has been dragging down profits, though Tyson said in January that it would return to profitability within two quarters.

Jagdale also said profits in beef and pork are expected to weaken in the next 12 months as consumers cut back.

Shares of Sanderson Farms rose $2.66, or 7.6 percent, to close at $37.91 Thursday, while shares of Tyson rose 5 cents, or 0.5 percent, to $9.93.

The firm also initiated coverage Hormel Foods Corp., maker of Spam and other meat products, with a buy rating. Jagdale said Hormel has a balanced business model — since it also makes packaged food, in addition to meat products, and is "focused on innovation and brand-building."