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Can Pilgrim's Pride (PPC) Earnings Pull a Surprise in Q3?

Pilgrim's Pride CorporationPPC is scheduled to report third-quarter 2015 results after the closing bell on Oct 28, 2015. A renowned major diversified food company, it engages in production, distribution and marketing of frozen, fresh and value-added chicken products to various foodservice operators, distributors and retailers in the market.

For the trailing four quarters, the company generated a positive average earnings surprise of 5.99%, surpassing estimates in all quarters. Let's see how things are shaping up prior to this announcement.

Factors to Influence Q3 Results

Pilgrim's Pride makes concerted efforts to expand margins by reducing operational costs. Since 2013, the company has been following a zero-based budgeting strategy to lower its costs of sales. Moreover, with the help of other initiatives such as enhancement of labor efficiency, optimal water usage, methodical management of waste water and proper plant maintenance, the company attempts to maximize its productivity over time.

However, the company encounters certain issues that might offset the above-mentioned positives. Difficult times continue to haunt the meat industry, as Avian flu outbreak pose serious problems for meat producers like Pilgrim's Pride that mainly depend on the chicken segment for revenues. Moreover, the meat industry anticipates that increasing occurrence of such incidents might compel consumers in the U.S. as well as other countries to reduce chicken consumption.

Further, Pilgrim's Pride's international operations are exposed to risks arising from unfavorable currency fluctuations. At the same time, the company's earnings remain highly sensitive to the market price as well as availability of certain products such as soybean meal, corn and sorghum, as these items are used as intermediate inputs in some of its offerings or for its living operational process. Any sudden supply-demand imbalance or fluctuations in price of these materials might raise the company's operational expenses, thus weighing on its bottom-line figures in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively state that Pilgrim's Pride is likely to beat earnings in the quarter under review. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for an earnings beat. That is not the case here, as we will see below.

Zacks ESP: Pilgrim's Pride has a 0.00% Earnings ESP for the quarter, as the Most Accurate estimate of 68 cents stands in line with the Zacks Consensus Estimate.

Zacks Rank: Pilgrim's Pride's Zacks Rank #4 (Sell), when combined with a zero ESP, makes surprise predictions difficult. However, we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Nexstar Broadcasting Group, Inc. NXST , with an Earnings ESP of +8.93% and a Zacks Rank #2.

Townsquare Media, Inc. TSQ , with an Earnings ESP of +2.50% and a Zacks Rank #2.

Outerwall Inc. OUTR , with an Earnings ESP of +4.29% and a Zacks Rank #1.

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PILGRIMS PRIDE (PPC): Free Stock Analysis Report

OUTERWALL INC (OUTR): Free Stock Analysis Report

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TOWNSQAR MEDIA (TSQ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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