For Immediate Release
Chicago, IL – July 7, 2022 – Today, Zacks Investment Ideas feature highlights Sanderson Farms SAFM.
This Consumer Staples Stock Has Been Hitting All-Time Highs
It goes without saying that 2022 has been rough sailing in the market. Investors have had few hiding places and have witnessed deep valuation slashes left and right.
With inflation at levels not seen in decades, the Fed has been forced to become more aggressive, cranking borrowing rates. This monetary policy tightening, paired with geopolitical issues and supply chain bottlenecks, has created a challenging macroeconomic backdrop.
However, there have been a few bright spots in the market year-to-date, such as companies in the Zacks Consumer Staples Sector. Companies within this sector generate consistent and reliable revenues due to their products’ persistent demand – in the face of good and bad times.
The sector has undoubtedly been a bright spot throughout 2022, providing investors with a much higher level of defense than other sectors.
One such company in the sector, Sanderson Farms, has been pushing all-time highs and sports the highly coveted Zacks Rank #1 (Strong Buy). In addition, the company has an overall VGM Score of an A.
The company resides in the Zacks Food – Meat Products Industry, which currently ranks in the top 13% of all industries. Studies have shown that roughly half of a stock’s price movement can be attributed to a stock’s industry group. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than two to one.
Let’s examine the company a little closer to see why it’d make a solid bet for investors looking to reap the rewards of a strong sector.
Sanderson Farms is a poultry processing company that produces, processes, markets, and distributes fresh and frozen chicken products.
Year-to-date, SAFM shares have been notably stronger than the S&P 500, increasing nearly 14% in value. The chart below illustrates the year-to-date performance of SAFM shares while blending in the S&P 500.
Upon widening the timeframe to encompass a year’s worth of price action, we can see that SAFM shares have also outpaced the general market in this time frame.
Growth Estimates & Quarterly Results
Analysts have been upping their earnings outlook substantially across all timeframes over the last 60 days, undoubtedly a bullish sign. The $12.42 per share estimate for the upcoming quarterly release reflects a substantial 70% growth in earnings from the year-ago quarter.
Additionally, the $48.02 per share estimate for FY22 represents a triple-digit 140% increase in earnings year-over-year.
Sales estimates display top-line strength as well. For its upcoming quarterly release, the Zacks Consensus Sales Estimate resides at $1.7 billion – a 26% increase from year-ago quarterly sales of $1.3 billion.
Furthermore, current fiscal year sales are forecasted to reach $6.3 billion, a solid double-digit expansion of 30% within the top line year-over-year.
Sanderson Farms has beaten EPS Estimates by 60% on average over its last four quarters, and in its latest earnings release, the company crushed the quarterly EPS estimate by a triple-digit 111%.
Valuation & Dividends
SAFM’s current forward price-to-sales ratio sits enticingly at 0.8X, well below its 1.2X high in 2017 and just a tick below its five-year median value of 0.9X. Additionally, the current value represents a staggering 73% discount relative to the S&P 500’s forward price-to-sales ratio of 3.3X.
Sanderson Farms enjoys rewarding its shareholders via its 0.8% annual dividend yield with a payout ratio sitting more than sustainably at 5% of earnings. Over the last five years, the company has increased its dividend payout twice and has a five-year annualized dividend growth rate of a notable 10.9%.
Additionally, the yield is modestly lower than that of the S&P 500.
SAFM shares have undoubtedly been a bright spot in an otherwise dim market. Companies within the Consumer Staples Sector are generally more defensive in nature and generate revenue in many sorts of economic environments.
Analysts have been pushing their earnings estimates substantially higher over the last 60 days, making the company appear even more enticing and helping push it into a Zacks Rank #1 (Strong Buy).
For investors seeking exposure to a rock-solid sector that provides a much higher level of defense, SAFM would be a great place to start.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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