Investors in Sanderson Farms, Inc. (NASDAQ:SAFM) had a good week, as its shares rose 6.0% to close at US$176 following the release of its yearly results. Sanderson Farms reported US$3.4b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$2.41 beat expectations, being 8.0% higher than what analysts expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the latest consensus from Sanderson Farms’s seven analysts is for revenues of US$3.86b in 2020, which would reflect a meaningful 12% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to soar 333% to US$10.41. In the lead-up to this report, analysts had been modelling revenues of US$3.82b and earnings per share (EPS) of US$9.09 in 2020. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the decent improvement in earnings per share expectations following these results.
Analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 9.4% to US$178. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Sanderson Farms analyst has a price target of US$200 per share, while the most pessimistic values it at US$153. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Sanderson Farms’s past performance and to peers in the same market. Analysts are definitely expecting Sanderson Farms’s growth to accelerate, with the forecast 12% growth ranking favourably alongside historical growth of 4.7% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 2.8% next year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Sanderson Farms to grow faster than the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Sanderson Farms following these results. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for Sanderson Farms going out to 2022, and you can see them free on our platform here.
We also provide an overview of the Sanderson Farms Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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