Sanderson Farms Expects 2011 To Be A Tough Year

Jefferies & Company has published a research report on Sanderson Farms SAFM after the company reported significant losses to EPS in its 1Q, falling below analyst estimates. In the report, Jefferies writes "SAFM reported an F1Q operating loss of $0.87, well below the Street estimate for a $0.33 loss and our expectation for a $0.40 loss. COGS was 102% of sales in the quarter primarily driven by a jump in corn & soybean prices and a decline in chicken prices. Investors are aware that high feed costs and stubbornly low chicken prices have combined to drive chicken production losses since at least early November. The debate on the Street, in our view, has focused on how long this period of unprofitability will last. Based on SAFM's comments this morning, the pressure could persist for the balance of the fiscal year, which would undercut the bullish expectations by many investors that have resulted in a 10% run in SAFM shares over the last four weeks." Jefferies maintains its Hold rating and $44 price target. Sanderson Farms closed yesterday at $43.86.