Why the Farm Pride Foods Ltd. share price soared today

Credit: river seal

Shares in national eggs supplier Farm Pride Foods Ltd. (ASX: FRM) soared nearly 30 per cent today after the company announced a profit upgrade for the six-month period ending December 31 2015.

Farm Pride Foods now expects operating earnings for the half-year period between $7.5 million to $8.5 million, which will continue a streak of strong earnings growth as the company pays down debt and posts growing volumes of retail egg sales.

The business is gradually improving operating performance largely by reducing costs as it continues to adjust to changing demand patterns across the retail sector.

For example free-range egg demand is forecast to steadily increase and the business has been investing to meet this growth, while egg consumption in general continues to grow thanks in part to the natural support of Australian population growth.

Investors clearly liked today’s news over the earnings upgrade and sent the stock to a record high of $1.90 at one point today, although risks remain for investors over the potential for regulatory, biosecurity, or meteorological issues impacting the company’s earnings outlook significantly.

The agriculture space in general has caught an updraft recently with stocks like fruit and vegetable supplier Costa Group Holdings Ltd (ASX: CGC), agricultural operator Elders Ltd (ASX: ELD), and honey retailer Capilano Honey Ltd (ASX: CZZ) performing well over the past six months.

Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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