Commodities still drive long-term returns at Sanderson, and protectionism could constrain results.
Our $134 per share valuation for no-moat Sanderson Farms should not see a large change after it released first-quarter earnings. The firm reported 12% sales growth against nearly 300 basis points of operating margin degradation, versus our full-year marks of 6% (front-loaded due to plant investments) and 90 basis points (to 11.8%). We attribute much of the soft profitability to transitory factors, so our long-term targets (3% sales growth, high-single-digit operating margins, on average, over th...Sanderson Farms is a poultry processing company engaged in the production, processing, marketing and distribution of frozen chicken products, including processed and minimally prepared chicken. The company sells ice-packed, chill-packed, bulk-packed and frozen chicken, in whole, cut-up and boneless form to retailers, distributors, and casual dining operators, and to customers who resell frozen chicken into export markets. The company operates through: Sanderson Farms, Inc. (Production Division), which is engaged in the production of chickens to the broiler stage; and Sanderson Farms, Inc. (Processing Division), which is engaged in the processing, sale and distribution of chicken products.
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