The Zacks Analyst Blog Highlights: Tyson Foods, Sanderson Farms, Supervalu, Kroger and Edison International

Feb 26, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Feb. 26, 2013 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Tyson Foods Inc. (NYSE: TSN), Sanderson Farms Inc. (Nasdaq: SAFM), Supervalu Inc. (NYSE: SVU), Kroger Company (NYSE: KR) and Edison International (NYSE: EIX).


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Here are highlights from Monday's Analyst Blog:

Sequester to Affect Meat Giants

The meat industry, which hit a two year high in exports to Japan last week, apprehends a huge loss when inspectors are furloughed by the U.S. Agriculture Department (USDA), according to the proposed budget of the U.S. government in March 2013.

The spending cut and tax increases to cover the deficit by the U.S. government was scheduled to begin in Jan 2013, but was eventually pushed back to Mar 2013. This was because the differences between President Obama and congressional Republicans were still to be resolved.

Up to one-third of the workers appointed by the U.S. Agriculture Department could be laid off as a cost-cutting measure by the U.S. government.

If that happens, it will lead to a two-week shutdown of plants owned by meat processing giants like Tyson Foods Inc. (NYSE: TSN) and Sanderson Farms Inc. (Nasdaq: SAFM). By law, meat processors cannot sell beef, pork, lamb and poultry meat without the USDA inspection seal.

According to Agriculture Secretary Tom Vilsack, the impact of the furlough of inspection personnel may amount to 15 days of lost production costing over $10 billion. However, Vilsack has assured meat processing giants that they will not have to shut down the plants very soon. That is on account of the inspectors being allowed 30 to as many as 120 days, or four months' notice of layoffs.

The move to furlough the nation's federal meat, poultry and egg products inspectors by the USDA as a measure of sequestration has been condemned by several organizations. The National Chicken Council requested the USDA to consider the decision once again as the shutdown of meat plants will negatively affect schools and other public institutions that rely on contracted-for meat and poultry products.

Sanderson Farms apprehends a huge loss during the 15-day furlough of inspection personnel and consequent shutdown of plants. The company also said that live chickens would suffer from higher mortality. The mortality would occur when chickens gained weight as a result of the company postponing chicken processing, which would in turn affect supply to grocery chains like Supervalu Inc. (NYSE: SVU) and Kroger Company (NYSE: KR).

Tyson Foods, however, said that it is monitoring the proceedings regarding the budget cut and that it would stay away from any speculation in the interim period.

Currently both Tyson Foods and Sanderson Farms carry a Zacks Rank #1 (Strong Buy).

Edison Int'l to Miss Again?

EdisonInternational (NYSE: EIX) is slated to release its fourth quarter 2012 financial results after the market bell on Feb 26, 2013. In the last reported quarter, the electric generation and distribution company posted a negative surprise of 26.36%. Let's see how things are shaping up at Edison prior to this announcement.

Factors to Consider This Quarter

We believe the company's weak merchant generation fleet, pending general rate case decision and uncertainty regarding the approval of restarting the San Ofre nuclear unit will act as challenges for the stock.

However, benefits accrued from sale of its remaining lease interest in the Beaver Valley nuclear station and lower income tax could somewhat provide a respite from the aforementioned negatives.

Earnings Whispers

Our proven model does not conclusively show that Edison International is likely to beat earnings this quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here.

Negative Zacks ESP: This is because the Most Accurate estimate stands at $1.05 per share while the Zacks Consensus Estimate is higher at $1.09, resulting in -3.67% ESP.

Zacks Rank #3 (Hold): Edison's Zacks Rank #3 when combined with negative ESP makes surprise prediction difficult. We caution investors against the stock going into the earnings announcement, as a negative Zacks ESP lowers the possibility of an earnings surprise.

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