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Pilgrim's Pride Now a Strong Buy - Analyst Blog

Posted: 10/3/2013 1:47:00 PM
Referenced Stocks: ANFI;CVGW;PPC;TSN

Zacks Investment Research upgraded Pilgrim's Pride Corporation ( PPC ) to a Zacks Rank #1 (Strong Buy) on Oct 2, based on impressive second-quarter 2013 results and a strong outlook.

Why the Upgrade?

Pilgrim's Pride reported strong results for the second quarter of 2013, with earnings per share of 74 cents, increasing 174.1% year over year. The increase in earnings was a result of strong revenues as well as the company's excellent operational performance.

Revenues for the quarter were $2.2 billion, recording a year-over-year hike of 10.6%. Results were boosted by a demand hike in the U.S. as well as Mexico. Adjusted earnings before interest, taxes, depreciation and amortization increased 110.8% year over year to $265.0 million in the second quarter.

The Zacks Consensus Estimate for 2013 has increased 33.9% in the last 90 days to $2.21 per share and for 2014 the estimate went up 43.5% to $2.11 per share during the same time frame.

With the third-quarter 2013 results expected soon, management expects the second half of 2013 to be better than the first half. Pilgrim's Pride believes that it on track to reach a level of 30% growth in value-added exports for 2013. For the purpose, the company launched a value-added brand - Savoro - which is expected to enhance its presence in Middle East, Africa and Asia.

It is also expected that the feed ingredient prices will see a drop in the fourth quarter of 2013, thereby, reducing the cost of goods sold by the company.

Moreover, Pilgrim's Pride plans to sell its Batesville, Ark.-based processing complex, which accounts for only 1% of the company's revenues. The divestiture will help the company to align its facilities with its long-term growth strategy.

Additionally, in August, the company pledged an investment of $25.0 million in its operations in Alabama. The investment includes $10.0 million for the overhaul of the company's processing facility in Enterprise, along with the construction of a feed mill facility in Pinckard.

Other Stocks to Consider

Apart from Pilgrim's Pride, other stocks in the industry with a favorable Zacks Rank include Amira Nature Foods Ltd. ( ANFI ), Calavo Growers Inc. ( CVGW ) and Tyson Foods, Inc. ( TSN ). While Amira Nature Foods and Calavo Growers carry a Zacks Rank #1 (Strong Buy), Tyson Foods carries a Zacks Rank #2 (Buy).

AMIRA NATURE FD (ANFI): Free Stock Analysis Report

CALAVO GROWERS (CVGW): Free Stock Analysis Report

PILGRIMS PRIDE (PPC): Free Stock Analysis Report

TYSON FOODS A (TSN): Free Stock Analysis Report

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Zacks Investment Research