By Tonya Garcia, MarketWatch
The chicken sandwich craze has been a business driver for fast-food chains, and has the potential to give chicken producer Sanderson Farms Inc. a bump in 2020, the company said Thursday.
Sanderson Farms /zigman2/quotes/201978364/composite SAFM -1.44% reported a loss of $1.05 per share and sales of $906.5 million for the fourth quarter against a FactSet consensus for a loss of $1.18 per share and sales of $888.0 million.
Sanderson Farms stock closed Thursday up 2.8%.
“The fourth quarter marked the end of the second fiscal year in a row during which market prices for boneless breast meat produced at our plants that process a larger bird for food service customers fell to historically low levels after Labor Day,” said Joe Sanderson, Jr., chief executive officer of Sanderson Farms, in a statement.
However, the company thinks it will have a better story to tell next year.
“The protein deficit caused by African swine fever in China and other countries, recently well-publicized chicken sandwich features at quick-serve restaurants, and expected higher retail pork and beef prices should all support stronger poultry markets as we move into 2020,” Sanderson said.
Popeyes, part of the Restaurant Brands International Inc. /zigman2/quotes/202094900/composite QSR -0.24% portfolio, took the battle up a notch with the launch of its own sandwich. The Popeyes chicken sandwich, which was intended to be a limited-time offer lasting several months, sold out in two weeks. It was relaunched on Nov. 3.
Though McDonald’s Corp. /zigman2/quotes/203508018/composite MCD -0.05% has offered a number of chicken sandwiches for some time, it too is stepping up its game. The fast-food giant is reportedly testing a fried chicken sandwich made with pickles and a potato roll, along with a “deluxe” version topped with lettuce tomato and mayo, in two cities through Jan. 26.
In China, hog herds have been depleted dramatically because of the outbreak of African swine fever, which continues to wreak havoc on the meat industry. The outbreak is driving up pork exports to that region, but also pork prices.
CFRA has determined that Sanderson Farms, along with Hormel Foods Corp. /zigman2/quotes/209170265/composite HRL -0.53% , Tyson Foods Inc. /zigman2/quotes/201117502/composite TSN -3.36% and other food producers, are among the companies that stand to benefit from both the African swine fever outbreak and the partial trade agreement between the U.S. and Canada.
“Despite these positive developments, we remain grounded by the fact that Sanderson Farms is a low-cost, undiversified poultry producer that is highly exposed to the commodity markets, including grain and protein prices,” CFRA’s Arun Sundaram wrote in a post-earnings note.
CFRA rates Sanderson Farms stock hold with a $190 12-month price target, up $40.
JPMorgan analysts rate Sanderson Farms stock neutral with a $159 price target, up from $150.
“We can see a clear path to the stock temporarily exceeding our price target as chicken prices rise and investor sentiment improves. But we continue to think it is responsible to value Sanderson Farms on what we see as ‘normalized’ EPS,” analysts said.
“Therefore, although the impact of African swine fever many last for many years – potentially driving Sanderson Farms’ earnings above normal even after 2021 – we continue to believe that in a typical year over the long run, EPS will be around $12.”
The FactSet consensus is for full-year 2020 EPS of $10.88.
Sanderson Farms stock has rallied 71.2% over the past year while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.64% has gained 30.6% for the period.