UPDATE: Stephens Downgrades Sanderson Farms on Effects of Fall in Chicken Pricing

In a report published Monday, Stephens analyst Farha Aslam downgraded the rating on Sanderson Farms (NASDAQ: SAFM) from Overweight to Equal-Weight, and lowered the price target from $81.00 to $65.00.

In the report, Stephens noted, “We are lowering our rating on Sanderson Farms to Equal-Weight from Overweight as profitability may be hampered by a fall in chicken pricing, specifically leg quarters. Our price target is now $65, down from $81, and is based on 10x-11x our new C2014 EPS estimate of $6.22, in line with the stock's historical average. The chicken cycle is proving to be shorter and less robust than we had anticipated. 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. 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. Downward earnings revisions will likely limit SAFM's share price.”

Sanderson Farms closed on Friday at $62.43.