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Factors to Watch Ahead of Pilgrim's Pride (PPC) Q1 Earnings

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Pilgrim's Pride Corporation PPC is likely to witness year-over-year growth in the bottom line, when it reports first-quarter 2021 numbers. The Zacks Consensus Estimate has remained stable in the past 30 days at 27 cents per share, which indicates an increase of 50% from the year-ago quarter’s reported figure. However, this producer, marketer, processor and distributor of fresh, frozen and value-added chicken and pork products has a trailing four-quarter negative earnings surprise of 5.2%, on average.

Pilgrims Pride Corporation Price, Consensus and EPS Surprise

Pilgrims Pride Corporation Price, Consensus and EPS Surprise
Pilgrims Pride Corporation Price, Consensus and EPS Surprise

Pilgrims Pride Corporation price-consensus-eps-surprise-chart | Pilgrims Pride Corporation Quote

Key Factors to Note

Pilgrim's Pride is gaining from a sturdy European business. During the fourth quarter of 2020, net sales from European operations rose 4.1% year over year to $849.2 million. Effective operational strategies, strong pork exports and robust domestic demand have been contributing to the company’s performance in the region. In fact, management on its last earnings call said that it expects improved operational efficiencies, investments made in automation, focus on higher yields and better management of input costs to keep favorably impacting performance in the region. This bodes well for the quarter under review.

Additionally, the company’s focus on key customers is a pathway for refining the portfolio alongside creating competitive advantages over its peers, especially amid the coronavirus-led disruptions. In fourth-quarter 2020 earnings call, management stated that it announced a number of projects in 2020 to further support growth of its key customers. In this regard, the company is on track with doubling the case-ready capacity in its Cold Spring, Minnesota plant. Also, Pilgrim's Pride has been increasing the mix of more stable margin case-ready items. Moreover, it is converting a commoditized large bird deboning plant to effectively support solid demand from a key customer QSR in the small bird segment.

Apart from these, the company has been steadily augmenting the marketing support of its brands, as they expand and enter new regions. Additionally, it resorts to frequent supply-chain improvements to enhance efficiency and reduce costs. We note that Pilgrim's Pride has been grappling with increased cost of sales for the past few quarters. During the fourth quarter of 2020, the metric inched up 1% year over year to $2,890.4 million. Apart from these, the company incurred direct pandemic mitigating expenses of nearly $20 million for the fourth quarter and nearly $100 million for 2020.

Further, Pilgrim’s Pride has been witnessing sluggishness in U.S operations for a while now. During the fourth quarter of 2020, net sales in the U.S. operations amounted to $1,876.2 million, down 1.5% year over year. The company pointed out that the commodity sector continued to remain challenging, though it is trying to improve operating efficiency in the space. In fourth-quarter earnings call, management stated that although demand from industrial foodservice customers in the region was stable, it was still below the year-ago period’s level. The company also stated that it does not anticipate volumes to return close to earlier levels till the population is more widely vaccinated.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Pilgrim's Pride this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Pilgrim's Pride currently has a Zacks Rank #1 and an Earnings ESP of 0.00%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Archer Daniels Midland Company ADM currently has an Earnings ESP of +2.30% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medifast MED has an Earnings ESP of +6.25% and a Zacks Rank #3, currently.

Monster Beverage Corporation MNST has an Earnings ESP of +0.41% and a Zacks Rank #3, at present.

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