LAUREL, Miss. (AP) — Sanderson Farms Inc. reported net income of $28.7 million for its fiscal third quarter, a turnaround from a loss a year ago, as improved market conditions boosted revenue 22 percent.
The results announced Tuesday beat Wall Street expectations, and its shares jumped almost 6 percent in premarket trading.
The Laurel, Miss.-based chicken producer cautioned that while market conditions improved during the recent quarter, the company still faces challenges, pointing to high grain prices and the uncertainty surrounding this year's corn and soybean crops as a result of the continued drought conditions across the country.
In addition, while market prices for poultry have increased, it probably won't be enough to offset rising grain costs over the next few months. As a result, the company said it cut production earlier this month and it plans to run its plants below capacity until market conditions begin to improve.
For the quarter ended July 31, Sanderson's net income amounted to $1.25 per share versus a loss of $55.7 million, or $2.51 per share, in the same quarter last year.
Revenue rose to $624.9 million from $511.2 million, helped by higher poultry prices stemming from increased demand and lower production.
Analysts, on average, expected earnings of $1.07 per share on revenue of $609 million, according to a FactSet poll.
Sanderson said the average price for whole chickens rose 8.6 percent from year-ago levels, while boneless breast prices increased about 15 percent, but still remained relatively weak as a result of lower food service demand.
Prices for jumbo wings more than doubled to $1.59 per pound, while the average quoted market price for bulk leg quarters rose about 12.2 percent, the company said.
Meanwhile, cash prices for corn delivered to the company fell 5.7 percent, while the price of soybean meal rose 8.2 percent.
Sanderson shares rose $2.35, or 5.8 percent, to $42.94 in premarket trading. They have risen 19 percent from a 52-week low of $36.11 on July 24.