- Oops!Something went wrong.Please try again later.
Sanderson Farms, Inc. (NASDAQ:SAFM) just released its quarterly report and things are looking bullish. Revenues and losses per share were both better than expected, with revenues of US$823m leading estimates by 2.5%. Statutory losses were smaller than analysts expected, coming in at US$1.76 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
After the latest results, the six analysts covering Sanderson Farms are now predicting revenues of US$3.77b in 2020. If met, this would reflect an okay 7.0% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to jump 183% to US$4.12. Yet prior to the latest earnings, analysts had been forecasting revenues of US$3.79b and earnings per share (EPS) of US$8.15 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.
The average analyst price target fell 7.8% to US$157, with reduced earnings forecasts clearly tied to a lower valuation estimate. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Sanderson Farms, with the most bullish analyst valuing it at US$198 and the most bearish at US$135 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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 7.0% growth ranking favourably alongside historical growth of 4.9% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 2.6% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Sanderson Farms is expected to grow much faster than its market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sanderson Farms. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Sanderson Farms's future valuation.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Sanderson Farms going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Sanderson Farms's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.