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Pilgrim's Pride (PPC) Up More than 25% in 3 Months: Here's Why

Pilgrim's Pride Corporation PPC is benefiting from its focus on strategic growth initiatives, including a customer-centric approach and capacity expansions. Improvement in the foodservice business is yielding. The leading poultry producer benefits from strength in its Mexico, Europe and U.S. operations. The company continues to benefit from long-term investments like automation and focus on service for key customers. These were reflected in PPC’s first-quarter 2022 results, with the top and the bottom line increasing year over year. Earnings in the quarter surpassed the Zacks Consensus Estimate.

The Zacks Rank #1 (Strong Buy) company’s shares have jumped 26.7% in the past three months against the industry’s 4.7% decline. The company has comfortably outperformed the Zacks Consumer Staples sector, which witnessed 3.7% growth during the same period.

Let’s discuss all factors working for Pilgrim's Pride.

Zacks Investment Research
Zacks Investment Research

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Solid U.S. & Mexico Operations

Pilgrim's Pride has been benefiting from the growing Mexico business for a while now. During the first quarter of 2022, Mexico’s operations generated net sales of $467.2 million, up from $419.1 million in the prior-year quarter. The Mexico business benefited from the higher-than-expected demand, reflecting a rebound from the prior quarter. During the quarter, the company saw sales growth across all channels, with QSR growing the most. The company’s prepared food business witnessed double-digit growth with solid Pilgrim’s, Del Dia and Alamesa brands, across the region. The company’s branded fresh business unit also delivered impressive performance. The company expects to continue growing in Mexico by improving its branded product lines.

In the quarter, net sales in the U.S. operations were $2,581.2 million, up from $1,999.6 million reported in the year-ago quarter. The company’s U.S. operations led to growth, driven by the recovery in the foodservice business to the pre-pandemic levels and continued strength in retail demand. The foodservice business reported sales volumes close to the pre-pandemic level. Results gained from ongoing brand momentum across U.S. retail and solid e-commerce business, with Just Bare rising 49% and Pilgrim’s fully cooked growing more than 150%. Margins in the U.S. business were aided by strength in the commodity large bird deboning business.

Strategic Growth Initiatives

Pilgrim’s Pride’s customer-centric approach has propelled it to develop 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 its last earnings call, management highlighted that it is investing in a hatchery in Merida, which is expected to start operations in December 2022. In addition, the company is on track to expand its processing capacity.

Apart from this, the company 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. Moreover, the company’s dedicated efforts, including zero-base budgeting and positive impacts from acquisitions, are expected to create synergies. Keeping on track with its growth strategy, Pilgrim’s Pride acquired Kerry Consumer Foods’ Meats and Meals business in the U.K. and Ireland in September 2021. The acquired business solidifies Pilgrim’s Pride’s footing by operating as a business division under the company’s European operations. Management is on track with a disciplined capital allocation approach to diversify the portfolio, focus on key customers and achieve operational excellence. The company is focused on investing in high return on capital employed projects.

Focusing on strategic growth endeavors and other growth drivers will likely help Pilgrim's Pride keep its growth story alive and help it stay in investors’ good books.

3 Solid Food Stocks

Some better-ranked stocks are Sysco Corporation SYY, United Natural Foods UNFI and Medifast MED.

Sysco, which engages in marketing and distributing various food and related products, sports a Zacks Rank #1. SYY has a trailing four-quarter earnings surprise of 9.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sysco’s current financial year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.

United Natural Foods distributes natural, organic, specialty, produce, and conventional grocery and non-food products. UNFI currently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for UNFI’s current financial-year sales and EPS suggests growth of 7.2% and 4.9%, respectively, from the year-ago period’s reported figures. United Natural Foods has a trailing four-quarter earnings surprise of 29.9%, on average.

Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2. MED has a trailing four-quarter earnings surprise of 12.9%, on average.

The Zacks Consensus Estimate for Medifast’s current financial year sales and EPS suggests growth of almost 19% and 13.4%, respectively, from the year-ago reported figure.

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