SAFM - Embedded Expectations Analysis - 2020 10 27
Sanderson Farms, Inc. (SAFM:USA) currently trades at a premium relative to UAFRS-based (Uniform) assets, with a 1.3x Uniform P/B. At these levels, the market has somewhat bullish expectations for the firm, but management may have concerns about order rates, pricing, and industry weaknessSpecifically, management may have concerns about the sustainability of their weekly orders from their largest customers, retail tray pack business revenues, and continued declines in their market price. Furthermore, they may lack confidence in their ability to increase chicken production during 2020 and sustain their corn and soy supplies into fiscal 2021, and they may be concerned about pricing opportunities in fiscal 2021. Also, they may have concerns about continued industry-wide profitability weakness, the sustainability of boneless breast demand, and the potential rise of feed grain costs
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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