Sanderson Farms Jumps on Profit Surprise

Sanderson Farms easily beats quarterly profit forecasts, benefiting from lower chicken-feed costs.
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Sharply lower chicken-feed costs helped poultry processor

Sanderson Farms

(SAFM) - Get Report

score a much bigger profit in its fiscal second quarter than Wall Street had been expecting.

Investors bid up shares of the company in response. They closed trading Thursday at $44, up 4.7%, or $1.96, on volume of 1.8 million. Average daily turnover is just 258,000.

Before the bell Thursday, Sanderson reported earnings of $26.2 million, or $1.27 a share, ripping past analysts' expectations of 55 cents, according to Thomson Financial. A year ago, the company earned just $6.2 million, or 30 cents a share.

A drop in the cost of soybean and corn, which had reached historic highs in 2008, appeared to drive the company's bottom-line surprise. Sanderson also cited big industry-wide cutbacks in the production of chicken parts, which served to squeeze prices higher.

Still, Sanderson's quarterly revenue slipped 1.6% from the year-ago period to $426.8 million. Sales into the commercial or restaurant sector, as opposed to grocery stores, seemed to be the culprit. Or, as the company put it, "demand for protein consumed away from home remains soft."

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