NEW YORK (TheStreet) -- Sanderson Farms (SAFM - Get Report) stock is declining by 2.14% to $65.35 on Monday morning after analysts at KeyBanc Capital Markets lowered their price target to $61 from $65.
The firm maintained its "underweight" rating on the stock.
Analysts have a cautious view on pure-play chicken stocks as chicken prices have softened due to supplies outpacing demand, according to the analyst note.
Looking forward, chicken prices are expected to go down even more due to seasonally lower demand and lower pork prices.
Specifically, consumption of poultry at home was down 0.3% through May 2015 year to date, according to the Bureau of Economic Analysis.
Based in Laurel, MS, Sanderson Farms is an integrated poultry processing company that produces, processes, markets, and distributes fresh, frozen, and prepared chicken products in the U.S.
Separately, TheStreet Ratings team rates SANDERSON FARMS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate SANDERSON FARMS INC (SAFM) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 12.2%. Since the same quarter one year prior, revenues slightly increased by 8.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SAFM's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SAFM has a quick ratio of 1.79, which demonstrates the ability of the company to cover short-term liquidity needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Food Products industry and the overall market, SANDERSON FARMS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- SANDERSON FARMS INC has improved earnings per share by 41.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SANDERSON FARMS INC increased its bottom line by earning $10.80 versus $5.67 in the prior year. This year, the market expects an improvement in earnings ($11.43 versus $10.80).
- You can view the full analysis from the report here: SAFM Ratings Report