SAFM - Embedded Expectations Analysis - 2020 06 24
Sanderson Farms, Inc. (SAFM:USA) currently trades below historical averages relative to UAFRS-based (Uniform) assets, with a 1.2x Uniform P/B. Even at these levels, the market has somewhat bullish expectations for the firm, but management may be concerned about coronavirus-related costs, retail business pricing, and product mix changesSpecifically, may have concerns about the long-term impact of coronavirus-related expenses, the pace of dining and protein production recovery, and the sustainability of boneless breast price recovery. Moreover, they may lack confidence in their ability to meet their EPS targets, reduce their cost of sales, and control tray pack pricing in their retail business. Furthermore, management may be concerned about the impact of coronavirus on carryover stock and lower exports to China due to continued restaurant closures. Additionally, they may lack confidence in their ability to adapt their product mix to changing market demand, shift production from food service to retail, and address volume and labor inefficiencies in their Georgia facility
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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