Yahoo Finance Pilgrim's Pride (PPC) Poised on Solid Performance & Expansions
Pilgrim’s Pride Corporation PPC is benefiting from strength in its Europe and U.S. operations. The leading poultry producer’s strategic growth efforts, including capacity expansions, are worth noting. However, the company has been grappling with rising costs for a while.
Let’s delve deeper.
Solid Europe and U.S. Operations
During the third quarter of 2022, Pilgrim's Pride’s net sales in U.S. operations were $2,836.9 million, up from $2,466.9 million reported in the year-ago quarter. Its diversified U.S. portfolio across bird sizes and the Key Customers strategy supported its performance amid changing market conditions. Strength in the Case Ready and Small Bird businesses and momentum in the Prepared Foods business helped the company counter volatility in Big Bird Debone. It witnessed continued brand momentum in the U.S. retail, with Just Bare and Pilgrim’s prepared products increasing more than 45% year over year.
Net sales from the U.K. and Europe operations rose to $1,203.1 million in the third quarter from $930.4 million in the prior year quarter. Despite a tough consumer environment and extensive cost escalation, the company’s U.K. and Europe businesses witnessed sequential profit growth via a continued focus on Key Customer partnerships and operational efficiencies.
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Factors Driving Pilgrim’s Pride’s Growth
Pilgrim’s Pride’s customer-centric approach 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 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 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.
Pilgrim's Pride has been steadily augmenting the marketing support of its brands as they expand and enter new regions. The company resorts to frequent supply chain improvements to enhance efficiency and reduce costs. In this respect, it has been progressing 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 company is on track with investing in the business to accelerate organic growth, mainly with key customers. It continues looking for M&A opportunities to diversify its portfolio in segments and geographies. The company is progressing with embedding automation throughout the production units.
Hurdles on the Way
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. The business witnessed a decline in volumes, prices and profitability.
Pilgrim's Pride has been 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.
Nevertheless, we believe that the aforementioned upsides will likely keep driving Pilgrim's Pride’s growth story.
Shares of the Zacks Rank #3 (Hold) company have increased 2.7% in the past three months against the industry’s 1.8% decline.
3 Solid Food Picks
Some better-ranked stocks are Conagra Brands CAG, Campbell Soup (CPB) and Mondelez International, Inc. (MDLZ).
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. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests 5.8% and 3.8% growth, respectively, from the corresponding year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.2% and 4.9%, respectively, from the corresponding year-ago reported figures.
Mondelez International, which manufactures, markets, and sells snack food and beverage products, carries a Zacks Rank 2. MDLZ has a trailing four-quarter earnings surprise of 6.4%, on average.
The Zacks Consensus Estimate for Mondelez’s current financial-year sales and earnings suggests growth of 8.8% and 2.4%, respectively, from the corresponding year-ago reported figures.
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Pilgrim's Pride Corporation (PPC) : Free Stock Analysis Report
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