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Pilgrim's Pride (PPC) Up More Than 20% in 3 Months: Will it Stay?

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Zacks Equity Research
·4 min read
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Pilgrim's Pride Corporation PPC is in a good shape courtesy of its strategic growth endeavors that include customer-centric approach among others. Moreover, strength in European operations as well as focus on expanding its fresh food offeringsis impressive. Such upsides have propelled shares of Pilgrim's Pride to rally 23.2% in the past three months against the industry’s decline of 2.7%.

Let’s dive deeper.

What’s Working in Favor of Pilgrim's Pride?

Pilgrim's Pride’s customer centric approach propelled it to come up with unique offerings that provide competitive advantages. In fact, the company’s focus on key customers is a pathway for refining its portfolio along with creating competitive advantages over its peers, especially amid the coronavirus-led disruptions.

Apart from this, the company is steadily augmenting marketing support of its brands, as they expand and enter new regions. Additionally, Pilgrim's Pride resorts to frequent supply-chain improvements to enhance efficiency and reduce costs. In this respect, it is progressing well with developing automation technology for its processing plants. Introduction of such advanced technology is expected to increase efficiency and help in combating labor availability issues.


Additionally, Pilgrim’s Pride consistently strives to improve portfolio and strengthen competitive position through innovations. In this respect, the company is expanding in the fresh food offerings space. Further, it is on track to expand gluten-free products. Also, the company is increasing its product mix for organic category, including No-Antibiotics-Ever products, to cater customers' evolving tastes.

Notably, Pilgrim's Pride is gaining from sturdy European business. During the third quarter of 2020, revenues from European operations surged 63.4% year over year to $845.7 million. The uptick was driven by robust retail demand that helped the company negate adverse impacts of lower foodservice business amid COVID-19. Also, better operational efficiencies and solid pork exports to China were an upside. Apart from these, improved momentum from the recently-acquired European pork assets contributed to the upside.

Hurdles on the Way

While Pilgrim's Pride is benefiting from strength in its European business, weakness in the U.S. operations is a challenge. During the third quarter, revenues in U.S. operations dropped 1.9% mainly due to reduced net sales per pound stemming from lower demand for foodservice products and commodity pricing volatility. Although the company is seeing rebound in demand with impressive growth in Retail and QSR business, volatility and challenging environment in commodity segments is a persistent concern.

Apart from these, Pilgrim's Pride is grappling with increased cost of sales for the past few quarters. During the third quarter, the metric increased 10.6% year over year. Also, the company’s international presence exposes it to the unfavorable currency fluctuations.

Nevertheless, we believe that the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay afloat amid such hurdles and keep its growth story alive.

Better-Ranked Food Stocks

B&G Foods, Inc. BGS — sporting a Zacks Rank #1 (Strong Buy) at present — has a trailing four-quarter earnings surprise of 9.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darling Ingredients DAR, a Zacks Rank #2 (Buy) stock, has a trailing four-quarter earnings surprise of 26.3%, on average.

The Hain Celestial HAIN, currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 24.6%, on average.

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