Rev…. $8,477 m
CGS…. $7,729 m
NI …. $447 m
EPS …. $1.72
Based on guesstimated average: GA doc 97 cents; corn $7.50/bu; and SBM of $470/ton.
I realize this is a pretty bold guess, considering analysts are predicting 79 cents EPS on about $8 billion of sales. Gav has indicated he is thinking in this $400 m. range, others including daher and WM seem optimistic as well.
My guess on GA dock might be high going in to second half of the year. USDA’s 12 city broiler price average is forecasted to decline in the second half of the year to an average of 90-96 cents for 2013, per the January livestock, dairy and poultry outlook. This average has lagged GA dock price over the last two years, until recently. The USDA has been low on their outlook for broiler prices the last few months. I don’t have access to Urner Barry pricing, but those prices are relevant too. Chicken producers continue to maintain that chicken prices are not sensitive to rising beef prices. But, Americans have not experienced a short beef supply, as it will likely be this summer, for a very long time.
Lower Q4 2013 grain costs could bring my feed cost estimate down if the new crop harvest is plentiful. Futures for new crop corn are trading in the $6 range. If the grain harvest is short again …. Well, then producers reduce egg sets and that just prolongs these nice chicken prices. With USDA livestock consumption higher now than what was expected, got to think producers are worried about feeding those chickens, beef cattle and hogs this next August. I guess this is where PPC’s investment in facilities to accept and use S.A. grain pays off. Actually, they mentioned they paid for their investment with their first boat load.
If producers are worried about feeding those chickens, they have not shown it here in the first two weeks of January as egg sets and placements have been on the rise. Personally, I think the chicken industry will do better if corn trades in that $7 to $7.50 range. These higher grain costs should make producers nervous enough to hold off on adding to supply.
In addition to all that, chickens have a feed conversion advantage over beef and hogs, and consumer preference has been shifting towards chicken and away from beef.
This is the first time I’ve tried to model PPC’s EPS and I have also compared to SAFM and TSN’s chicken segment. I’ve noticed SAFM is more sensitive to fluctuations in commodity prices. Yet, as prospects have seemed to improve here in January, SAFM has been flat while PPC and TSN have had nice gains. TSN was boosted this week by an upgrade after Cargill shut down a beef processing plant in Texas. BTW did you see the volume on TSN on Friday? Wow!
This is everything I know about chickens … I probably don’t need to post anymore, but posting helps me think through my position. BTW … I increased my position in PPC and TSN a bit more this last week increasing my investment in chicken producers to a somewhat uncomfortably high % of my net worth …. so I too had to file a disclosure …. with my wife…. And I see she bought chicken for dinner tonight so she is now on board with doing her part to reduce supply... either that or really nervous about our future finances.