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Pilgrims Pride Corp - Stock Quote PPC

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Morningstar's Pilgrims Pride Corp Stock Analysis

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Pilgrim’s Pride Reports Strong Q1, but Profitability Level May Not Last; Shares Still a Bargain

Analyst Note

| Rebecca Scheuneman, CFA |

The year is off to a great start for no-moat Pilgrim’s Pride, with food service volumes (around 50% of sales) returning to prepandemic levels while retail demand remains solid despite rising inflation, as chicken is considered a cheaper alternative to other proteins. The firm recorded impressive sales growth of 30%, outpacing our 11% expectation for the full year. Labor shortages and low hatchability rates have resulted in product shortages, driving chicken prices higher, and we think Pilgrim’s may continue to benefit from pronounced disequilibrium in the market in the short run. Moreover, avian flu has begun to spread among global flocks, potentially limiting future supply, although the impact has been rather immaterial to date. Even so, we don’t plan to alter our $36 fair value estimate materially due to significant uncertainty around cost inflation and additional COVID-19 outbreaks, which could disrupt coming quarters.

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Pilgrims Pride Corp's Company Profile

Business Description

Pilgrim’s Pride is the second-largest poultry producer in the U.S. (62% of 2021 sales), Europe (26%), and Mexico (12%). The 2019 purchase of Tulip, the U.K.'s largest hog producer, marks the firm's entrance into the pork market, which represents about 10% of sales. Pilgrim's sells its protein to chain restaurants, food processors, and retail chains. Channel exposure is split evenly between retail and food service, with the majority of food-service revenue coming from quick-service restaurants. JBS owns 80% of Pilgrim’s outstanding shares; it attempted to purchase the remaining 20% in late 2021, but the board rejected JBS's $26.50 offer as inadequate, and we concur.

1770 Promontory Circle
Greeley, CO, 80634-9038
T +1 970 506-8000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 25, 2022
Stock Type Slow Growth
Employees 59,000

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