Why Sanderson Farms Shares Sank

Before you go, we thought you'd like these...
Before you go close icon

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Sanderson Farms sank 3% today after Stephens downgraded the poultry producer from overweight to equal weight.

So what: Along with the downgrade, analyst Farha Aslam lowered her price target to $65 (from $81), representing just 4% worth of upside to Friday's close. While contrarian investors might be attracted to the stock's steady slide since early August, Stephens thinks that falling chicken prices will likely weigh much more heavily on Sanderson's results than Wall Street expects.

Now what: Stephens sees Sanderson earning $6.22 per share in 2014 and expects the stock to trade at 10-11 times that estimate. "While feed costs, particularly corn prices, are declining -- in line with our expectations, chicken pricing is declining much faster than we had predicted as demand has been mixed and supply has been heavy," cautioned Stephens. "We are not looking for the chicken industry or Sanderson Farms to post negative earnings, but do anticipate that results will fall significantly short of consensus expectations." Of course, with the stock now off about 20% from its 52-week highs and trading at a price-to-sales of 0.55, those short-term concerns might provide patient investors with a solid long-term value opportunity. 

More reliable ways to build wealth

Dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

The article Why Sanderson Farms Shares Sank originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool owns shares of Sanderson Farms. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

People are Reading