Pilgrim’s Pride’s Revenue Expected to Fall 6% in 4Q15
Pilgrim’s Pride Gets 60% ‘Buy’ Ratings ahead of 4Q15 Earnings
Revenue estimates for 4Q15
Pilgrim’s Pride Corporation (PPC) had been showing positive revenue growth until 2Q15. Its revenue fell in both 2Q15 and 3Q15. Analysts expect 4Q15 revenue to come in at $1,974 million, which amounts to a 6.4% drop a YoY (year-over-year) basis. The expectation for full-year revenue is $8,194.4 million.
Recap of 3Q15 performance
PPC reported 3Q15 revenue of $2.1 billion compared to $2.3 billion in 3Q14. The company’s US operations contributed nearly 85.1% of the company’s total revenue, but revenue from US operations fell 11.2% YoY. Revenues from the Mexican business contributed $314.2 million, or 14.9% of the company’s overall revenue. This was an increase of 30% YoY.
In the 3Q15 earnings call, management mentioned that the company’s performance was affected by nonroutine expenses in two of its manufacturing facilities, a strong US dollar, continued challenges in the export markets, and low chicken cutouts. These factors affected the company’s segments as well as US exports and revenue from the Mexico business.
For 3Q15, PPC had cash and cash equivalents of ~$396.7 million, down from $576.1 million in 3Q14. T he company generated $196 million in free cash flow after taxes and capital investments in 3Q15, reaching a net debt of $610 million in the first nine months of 2015. In 3Q15, the company generated cash of $856.3 million from its operating activities. This was a 6.7% increase on a YoY basis. Capital spending was $129.8 million, down 1.1% YoY.
Management’s outlook
Pilgrim’s Pride’s management stated that the company’s 3Q15 results provide strong validation of its portfolio model. Management also mentioned that the strategy the company has pursued and implemented over the past four years is fundamental to improving its ability to maintain a strong performance, minimize the effect of various market conditions, and give it more consistent financial results.
The company continues to seek alternative and creative ways to reduce its dependence on commodity products and generate more consistent margins by sharpening its focus on high-growth markets.
In spite of the tough environment last quarter, Pilgrim’s Pride’s cash flow generation continues to be strong. The company also remains relentless in uncovering additional methods to increase operational efficiencies, enhance relationships with key customers, and build competitive advantages.
Peers’ revenues
Pilgrim’s Pride’s peers in the industry include The Campbell Soup Company (CPB), B&G Foods (BGS), and Flowers Foods (FLO). The revenue estimates for these companies are as follows:
The Campbell Soup Company to report $2.2 billion for fiscal 2Q16
B&G Foods to report $304.8 million for 4Q15
Flowers Foods to report $905.3 million for 4Q15
The PowerShares S&P 500 Low Volatility Portfolio (SPLV) and the PowerShares Dynamic Food & Beverage Portfolio (PBJ) invest 1.2% and 3.0% of their respective portfolios in CPB.
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