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Pilgrim's Pride: A Strong Buy

Zacks Equity Research

Zacks Investment Research upgraded Pilgrim’s Pride Corporation (PPC) to a Zacks Rank #1 (Strong Buy) on May 6, based on its impressive first quarter 2014 results and a strong outlook for the year ahead.

Why the Upgrade?

Pilgrim’s Pride reported improved year-over-year results for the first quarter of 2014. Earnings per share came in at 38 cents, improving 81% year over year on the back of lower cost of sales in the quarter. However, reported revenues were $2.02 billion, marginally lower than the prior-year quarter.

The company has been attempting to reduce its costs over the past few quarters. In the recently reported quarter, earnings before interest, taxes, depreciation and amortization (:EBITDA) increased roughly 74% year over year to $203.5 million, due to effective cost management.

Subsequent to the results, the Zacks Consensus Estimate for earnings per share increased 15.5% to $1.79 for 2014, while the same for 2015 increased 21.7% to $1.57, over the past seven days. Pilgrim’s Pride currently has an Earnings ESP of +7.02% for the second quarter 2014 and +8.94% for full year 2014.

The effective working capital management has helped the company to reduce its debt, diminish the capital cost and increase the free cash flow. The company is expected to be able to reap the benefits of an improving chicken industry in 2014 and thereby enhance the results further.

 Other Stocks to Consider

Apart from Pilgrim’s Pride, other stocks in the industry having a favorable Zacks Rank include Sanderson Farms, Inc. (SAFM), Fresh Del Monte Produce Inc. (FDP) and BRF S.A. (BRFS). All these stocks hold the same Zacks Rank as Pilgrim’s Pride.

Read the Full Research Report on PPC
Read the Full Research Report on FDP
Read the Full Research Report on SAFM
Read the Full Research Report on BRFS

Zacks Investment Research