United States-Sanderson Farms.

UNITED STATES-SANDERSON FARMS.

A Wall Street analyst raised earnings forecasts for Sanderson Farms, describing management’s tone in a recent meeting as "cautiously optimistic."

BB&T Capital Markets raised its earnings forecast for the company’s fiscal second quarter ending in April by 10 cents to 49 cents per share and raised the full-year forecast to $3.60 per share from $3.05.

In a note to investors, analyst Heather Jones attributed to more positive outlook to:

very significant production cuts

meaningful, sustained breeder flock reductions

improved overall pricing (but relatively soft breast pricing)

indications demand is stabilizing and

improved trends in exports.

Sanderson expects demand to continue to come from retail and exports, as it does not anticipate a recovery in foodservice until at least 2010. Exports are meaningfully improved with double-digit increases over a year ago in February and Russian chicken inventories relatively low, Jones noted.

Production cuts, however, take the largest share of the credit for improved prices. Pilgrim’s Pride has announced plans to cut 9 percent to 10 percent of its capacity, which translates to about 2 percent of industry capacity.

Sanderson Farms has cut weights by 10 percent at its big bird plants, a move it will re-evaluate for the second half of the year. "It is our opinion that it will likely not increase weights the full 10 percent, if at all, from current levels given its view on current and prospective fast-casual foodservice demand," Jones wrote.