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AI Identifies Sanderson Farms, Inc. Among Today’s Trending Stocks

After closing at an all-new record high on Friday, the Dow Jones Industrial Average slipped on Monday over concerns about its growth potential. The S&P 500 also traded down slightly, though the tech-heavy Nasdaq Composite saw incremental growth by the bell.

The losses also follow Friday’s strong jobs report, which saw the Labor Department note 943,000 new jobs added last month compared to 845,000 expected by economists. This number also beat out the comparatively abysmal ADP nonfarm private sector jobs report by almost triple for the month of July.

In other news, earnings season is starting to wrap up, as big names like Tyson, DISH Network
DISH
, Sysco
SYY
, eBay
EBAY
, and Wendy’s have or will release their quarterly reports this week.

This combination of economic news, inflationary and market growth angst, and quarterly earnings releases breeds a perfect storm of potential profits and long-term holds for savvy investors. So, without further ado, let’s dive into our list of trending stocks to see what’s hot and what’s not as we head into the second trading week of August.

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Sanderson Farms, Inc (SAFM)

Sanderson Farms, Inc. nudged up 0.6% on Friday to $182.37, climbing to 38% YTD gains with 80k trades changing hands. But on Monday, the stock soared 7.4% by the bell on the back of 3.66 million shares to a final price of $195.88. Currently, the stock sits up 48% for the year and trades at 12.7x forward earnings.

Sanderson Farms is the third-largest poultry producer in the United States, with more than 4.8 billion pounds of meat processed last year. The company’s sudden surge in price and interest is the result of a joint venture by Cargill and Continental Grain to acquire the poultry producer at a premium of $203 per share, or a total acquisition price of $4.53 billion in cash.

The deal – which comes as most chicken part prices sit above their five-year averages– is expected to close early next year, if not sooner. (Pending stockholder approval.) Should the acquisition commence, Cargill and Continental Grain plan to combine Sanderson Farms with Wayne Farms, a Continental Grain subsidiary, to form a new, private poultry business. Operations will run out of a variety of Midwestern and southern states including Arkansas, Texas, Mississippi, and Georgia, to name a few.

Over the last three fiscal years, Sanderson Farms has proved its worth as a poultry production company. Revenue grew more than 10.5% in the most recent year to $3.56 billion compared to $3.24 billion three years prior. That said, due to a combination of rising labor and production costs and pandemic pressures, operating income fell from $29.7 million to $24.8 million in the three-year period, with per-share earnings dropping from $2.70 to $1.27. As a result, return on equity dropped to 2% compared to 4.4%.

Still, Sanderson Farms is expected to see forward 12-month revenue growth in the ballpark of 1.6%. Our AI rates this poultry producer A in Growth, C in Low Volatility Momentum and Quality Value, and F in Technicals.

Tyson Foods, Inc (TSN)

Tyson Foods, Inc. closed up 1.4% on Friday to $71.12, trading almost 1.4 million shares on the day. At the time, the stock was up 10.4% for the year. But by Monday’s bell, the meatpacker’s share price had increased another 8.7% to $77.30 on the back of 5.2 million trades to a YTD gain of 20%. Currently, Tyson is trading at 12.4x forward earnings.

Tyson foods is trending for a variety of reasons this week, not least of which is the company’s Q3 2021 earnings report released on Monday. The meatpacking behemoth reported sales of nearly $12.5 billion for the quarter, with an operating income of $1.06 billion and net income of $753 million. Adjusted per-share earnings came out to $2.70 in the three-month period.

Newly appointed CEO Donnie King also took the opportunity to address inflation-related concerns, stating that the company can’t increase prices fast enough to keep pace with rising costs, including grain. To offset its expenses, Tyson has already raised prices for restaurants, and has planned a series of price hikes throughout the fall starting in September, King said. 

Tyson’s name also splashed across headlines after the meatpacking giant mandated Covid-19 vaccines for all workers last week. Since the decree, roughly 5,400 employees have been fully vaccinated or received their first shots ahead of the November deadline.

Over the last three fiscal years, Tyson’s share price has taken a bumpy ride – though overall, its balance sheet has shown improvement. Revenue grew 14% to $43 billion in the most recent year compared to $40 billion three years prior, with operating income expanding 32.5% to $3.7 billion compared to $3.15 billion. However, per-share earnings dipped drastically to $5.64 compared to $8.04, with return on equity plunging from 25% to 14%.

All told, Tyson Foods is expected to see around 1.6% growth in the next 12 months. Our AI rates this meatpacking monstrosity B in Low Volatility Momentum, C in Growth and Quality Value, and D in Technicals.

Exxon Mobil Corporation (XOM)

Exxon Mobil Corporation closed up 1.15% on Friday to $57.86 with 14.9 million shares trading hands. The stock is up 40% for the year and currently trades at 11.7x forward earnings.

Exxon Mobil has had a tough go of it in recent weeks. Notably, the oil and gas corporation was recently suspended from the Climate Leadership Council, a pro-carbon tax climate advocacy group that it helped create. The move comes after Greenpeace secretly recorded a lobbyist for the oil giant saying that the company only voiced support for a carbon tax because it knew it would be nigh-on impossible to implement.

The oil company was already under intense scrutiny and investor pressures after a climate activist investor won a boardroom battle that saw a quarter of its directors replaced in efforts to reduce future emissions.

Over the last three fiscal years, Exxon Mobil’s revenue has plunged by over $100 billion to $180 billion compared to $281 billion. Operating income has dropped from $23.3 billion to $3.98 billion in the period. At the same time, per-share earnings have risen from $4.88 to $5.25, while return on equity grew from 10.9% to 12.8%.

All told, Exxon Mobil is expected to see around 10.1% revenue growth in the next 12 months. Our AI rates this oil giant A in Low Volatility Momentum, B in Technicals, and D in Growth and Quality Value.

PG&E Corporation (PCG)

PG&E Corporation closed up 2.9% Friday, ending the last day of the week at $8.53 per share with 30.5 million trades on the docket. The stock is trading 30 cents below its 10-day price average and remains down 31.5% for the year. Currently, PG&E trades at 7.7x forward earnings.

Pacific Gas and Electric Corporation has had an incredibly tough ride in the last year as the company has struggled with rolling blackouts and increased energy demand during heatwaves. And now, the utility faces a judge-issued order to hand over documentation that its own equipment issues may have sparked the devastating Dixie Fire in California, including drone images and maps of each fire the company is suspected of starting this season.

The blaze, which first went up on 13 July in rural northeastern California, may be linked to a fire burning at the base of a tree leaning against power lines earlier that day. Unfortunately for the company, this fact was found tucked into a PG&E report that wasn’t filed until five days later – despite the California Public Utilities Commission requiring filing within two hours of incidents.

This revelation is just the latest blot on the company’s record, as PG&E has been found responsible for causing more than 1,500 wildfires in California since 2013. The company was forced to file for bankruptcy after admitting involuntary manslaughter for 84 deaths and facing $30 billion in liabilities as a result of the Camp Fire wildfire in 2018. As part of the proceedings, the firm restructured its board.

Over the last three fiscal years, PG&E’s revenue has grown from $16.8 billion to $18.5 billion. Operating income saw 23% growth in the same period, from $2.1 billion to $2.5 billion. However, return on equity plunged from 42.3% to 9.9% in the three-year time frame as per-share earnings plummeted from $13.25 to $1.05.

Currently, PG&E is expected to see revenue growth of 6.1% in the next 12 months. Our AI rates this company A in Growth and C in Technicals, Low Volatility Momentum, and Quality Value.

Nike, Inc (NKE)

Nike, Inc nudged down 0.6% Friday to $172.80, trading almost 4.1 million shares on the day. The stock is up $8 from its 22-day price average and 22.2% for the year. Currently, Nike is trading at 40.2x forward earnings.

Nike is trending this week after a flurry of new and upcoming athleticwear releases hit the market, inspired by everything from the flag of South Korea to its own sustainability efforts. The company is also pushing to continue its pandemic-era sales momentum as it launches into the latter half of 2021. Currently, the athleticwear giant is promoting initiatives such as Nike Unite, which designs stores for local communities, to boost its popularity and store footprint.

Over the last three fiscal years, Nike’s revenue has grown around 14% to $44.5 billion compared to $39.1 billion. Operating income saw 51.5% growth in the period from $4.77 billion to $7.2 billion, while per-share earnings jumped 43% to $3.56 in the most recent year compared to $2.49 three years prior. Additionally, return on equity climbed from 42.7% to 55%.

At this time, our AI rates Nike as an “average” investment prospect, with Bs in Low Volatility Momentum and Quality Value, a C in Technicals, and a D in Growth.

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