Pilgrim's Pride (PPC) Gains on Growth Efforts Amid High Costs
Focus on strategic growth efforts, including capacity expansions, are favoring Pilgrim’s Pride Corporation PPC. The leading poultry producer benefits from strength in its Europe and U.S. operations.
The aforementioned upsides were evident in its third-quarter 2022 results, with the top and the bottom line rising year over year. That being said, the company is not immune to the rising cost environment.
Let’s delve deeper.
Pilgrim's Pride reported adjusted earnings of $1.09 a share, up significantly from 67 cents in the year-ago quarter. Net sales of $4,469 million increased 16.8% from the year-ago quarter’s level. Net sales increased in Europe and the U.S. operations. The company’s quarterly results continue to reflect gains from the consistent execution of strategies. Despite major volatility of market fundamentals, the company’s U.S. business delivered impressive results. The company’s European business fueled growth despite significant inflationary pressure and a tough consumer environment.
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Strategic Growth Efforts on Track
Pilgrim’s Pride’s customer-centric approach has propelled it to come up with unique offerings that provide competitive advantages. The company’s focus on key customers is a pathway for refining its portfolio and creating competitive advantages over its peers. In this regard, management undertook several sessions to find ways to counter inflationary headwinds for key customers. Recently, the company announced efforts to optimize the manufacturing network.
Taking into account Pilgrim's Pride’s focus on profitable growth and impressive market momentum, management had unveiled some new investments in the United States earlier. In this regard, management is investing in expanding the Athens, GA, facility to improve service levels and boost Key Customer growth. The company will undertake operational excellence improvements via automation throughout its U.S. footprint and construct a protein conversion plant for pet food ingredients in Georgia. In addition, Pilgrim's Pride will develop a Prepared Foods facility in the Southeast U.S. to support branded growth and further diversify its portfolio. The company incurred capital expenditures of $146 million in the third quarter of 2022 on the earlier-announced organic growth investments and rebuilding of the hatchery in Mayfield, KY.
Apart from this, Pilgrim's Pride has been steadily augmenting 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. In this respect, it has been progressing well with developing automation technology for its processing plants. Introducing such advanced technology is expected to increase efficiency and aid in combating labor availability issues.
The Zacks Rank #3 (Hold) company is on track with investing in the business to accelerate organic growth, mainly with key customers. It continues to look for M&A opportunities to further diversify its portfolio in segments and geographies. The company is progressing with embedding automation throughout the production units.
Is All Rosy For Pilgrim's Pride?
Pilgrim's Pride is grappling with the increased cost of sales for a while. During the third quarter of 2022, Pilgrim's Pride’s cost of sales increased to $3,972 million from $3,455.7 million reported in the year-ago quarter.
In the third quarter of 2022, Pilgrim's Pride’s Mexico operations generated net sales of $429 million in the reported quarter, down from $430.3 million in the prior-year quarter. The company’s Mexico business saw softness in overall sales and profitability due to seasonality and weakened market conditions. Its Mexico business was hurt by major inflation and slowing demand. Apart from this, issues with mortality in live operations led to the downside. Incidentally, the business witnessed a decline in volumes, prices and profitability.
That said, focusing on strategic growth endeavors along with solid performance across most regions is likely to keep PPC afloat amid such hurdles.
Shares of Pilgrim's Pride have fallen 11.2% in the past year compared with the industry’s 17.8% decline.
3 Solid Staple Picks
Some top-ranked stocks are The Chef's Warehouse CHEF, Conagra Brands CAG and The J. M. Smucker Company SJM.
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). Chef's Warehouse has a trailing four-quarter earnings surprise of 93.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial year sales suggests growth of 46.5% from the year-ago reported number, while earnings indicate significant growth.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported figures.
The J. M. Smucker, which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 18.5%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year sales suggests growth of 5.6% from the year-ago reported figure.
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