Analyst Note| Rebecca Scheuneman, CFA |
We were quite impressed with no-moat Pilgrim’s Pride’s second-quarter sales growth of 25%, or 16% over the second quarter of 2019 excluding the Tulip acquisition. It experienced strong demand from restaurants (quick-serve and full-service alike), while retail demand remains elevated. Non-restaurant food-service (10% of sales) remains 30% below prepandemic levels but should recover this fall when schools reopen. This result puts the firm on track to exceed our 5% organic sales growth estimate for fiscal 2021, which we plan to increase to 9%. Even so, we expect about a low-single-digit drop in our $33.50 fair value estimate as we incorporate our expectations for an increase in the U.S. statutory tax rate beginning in 2022. When taken together, we still view shares as attractive, trading 30% below our revised valuation.