Pilgrim's Pride (PPC) Benefits on Capacity & Portfolio Growth
Pilgrim's Pride Corporation PPC has been gaining from efforts to expand portfolio and boost capacity for key products, robust online sales as well as prudent marketing strategies. Additionally, solid growth in Mexico and gradual revival of U.S operations are upsides for the company. In fact, well-chalked operational strategies have helped it stay afloat amid tough market conditions stemming from pandemic-led disruptions in certain key markets.
Shares of the Zacks Rank #3 (Hold) company have rallied 19.5% in the past six months compared with the industry’s rise of 12.3%. That said, let’s take a closer look at the aspects impacting the performance of this well-known meat products company.
Prudent Growth Efforts Across Categories
Pilgrim's Pride’s customer-centric approach enabled it to come up with unique offerings that provide competitive advantages. In fact, focus on key customers helps it refine portfolio and create competitive advantages over its peers. Management is on track with a number of projects to support growth of its key customers. In this regard, the company is doubling the case-ready capacity in its Cold Spring, Minnesota plant. Also, Pilgrim's Pride is increasing the mix of more stable margin case-ready items and is expanding the manufacturing of Just BARE brand items by 20%. Moreover, it is converting a commoditized large bird deboning plant to effectively support demand.
Apart from this, the company is steadily augmenting marketing support of its brands, as they expand and enter new regions. It resorts to frequent supply-chain improvements to enhance efficiency and reduce costs. In this respect, it has been progressing well with developing automation technology for its processing plants. Moreover, the company’s dedicated efforts, including zero-base budgeting and positive impacts from acquisitions are expected to create synergies.
Speaking of acquisitions, the company recently agreed to purchase the Kerry Consumer Foods’ Meats and Meals business in the United Kingdom and Ireland. The deal, which is expected to be completed in fourth-quarter 2021, is likely to boost Pilgrim's Pride’s prospects in the Prepared Foods arena. Pilgrim's Pride has also been strengthening its portfolio through innovations. The company is increasing its product mix for organic category, including No-Antibiotics-Ever products, to meet customers' evolving tastes.
Moreover, the company continues to see solid growth in online sales, mainly on the back of strength in the case-ready and prepared foods portfolio. It projects online sales to increase about 22% over the next five years.
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Strong Sales Despite Hurdles
During first-quarter 2021, the company witnessed sales growth across Mexico, the U.K. and Europe as well as the United States, which in turn drove the top-line performance. The company’s Mexican operations gained from normalization of the economic environment, balanced supply/demand scenario and increased share of non-commodity products. Additionally, growth in demand for Prepared Foods was an upside. Apart from this, the company’s combined European operations witnessed growth, backed by prudent operational improvements, despite weak foodservice volume due to lockdowns and costs related to the pandemic.
Also, the company stated that market conditions in the United States improved during the first quarter, even though there were some challenges related to severe weather in the southeast during February. Moreover, it is seeing recovery in the foodservice business as pandemic-led restrictions are being eased. The company’s retail and QSR business also remained strong on solid demand conditions. U.S. Prepared Foods business continues to gain traction. Also, its market for commodity large bird deboning saw improvements.
Wrapping up, we expect Pilgrim's Pride to keep gaining from improving market and operational scenarios across markets, as pandemic-led shortcomings gradually subside due to mass vaccinations.
Looking for Food Stocks? Check These
Darling Ingredients Inc. DAR, flaunting a Zacks Rank #1 (Strong Buy), delivered an earnings surprise of 29.6% in the past four quarters, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medifast, Inc. MED, also with a Zacks Rank #1, delivered an earnings surprise of 12.7% in the last four quarters, on average.
Nomad Foods Limited NOMD has a trailing four-quarter earnings surprise of 10.3%, on average. It carries a Zacks Rank #2.
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