7/26/2010- Morgan Stanley analysts downgraded Sanderson Farms (NASDAQ:SAFM) to underweight from equal-weight as they expect grains prices to continue their recent rally but chicken price increases may materially lag grain.
Analysts Vincent Andrews, Gregory Van Winkle and Jaclyn Inglesby said, "We are reducing our estimates (F2011 from $5.88 to $4.90) and are now well below consensus ($5.97). We are also establishing a twelve-month price target of $43, which assumes Sanderson can trade at 4.25-times F2011 EBITDA (the middle of its historical 3-5-times range). This would bring the stock back near the level at which it traded at the beginning of 2010 when the grain price outlook was similar to today."
The bank sees fiscal 2010 EPS of $5.25 and fiscal 2011 EPS of $4.90.