SAFM

Sanderson Farms Inc.

Industrial/Transportation, Consumer


Presented:12/11/2014
Price:$90.70
Cap:$1.99B
Current Price:$204.00
Cap:$4.55B

Presented

Date12/11/2014
Price$90.70
Market Cap$1.99B
Ent Value$1.97B
P/E Ratio14.8x
Book Value$35.65
Div Yield0%
Shares O/S23.07M
Ave Daily Vol590,000
Short Int12.10%

Current

Price$204.00
Market Cap$4.55B
Sanderson Farms, Inc., an integrated poultry processing company, produces, processes, markets, and distributes fresh, frozen, and prepared chicken products in the United States. Its prepared chicken product line includes institutional and consumer packaged partially cooked or marinated chicken items for distributors and food service establishments. The company sells ice pack, chill pack, bulk pack, and frozen chicken in whole, cut-up, and boneless form under the Sanderson Farms brand name to retailers, distributors, and casual dining operators, as well as to customers who resell frozen chicken in the export markets. Sanderson Farms, Inc. was founded in 1947 and is based in Laurel, Mississippi.

Publicly traded companies mentioned herein: Pilgrim’s Pride Corp (PPC), Sanderson Farms Inc (SAFM), Tyson Foods Inc (TSN)

Highlights

The presenter is short shares of Sanderson Farms (SAFM), the third largest poultry processor in the US, and believes the cycle is turning and new supply will pressure prices. Generally speaking, the poultry cycle is relatively straight forward to track because there is good data from the USDA and other sources available. The issue today is whether or not there will be enough demand to absorb the coming increase in supply. If not, 2015 could be a difficult year for poultry producers. The last down cycle was in 2011, and “that was brutal,” said the presenter, as he recounted how balance sheets were stretched and pullet rearing was cut back to curtail supply. At ~$90 per share, he sees a favorable risk/ reward for bears on SAFM as upside risk should be limited and there is the potential for a fairly substantial decline in the near term.

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Idea Discussion

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