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Pilgrims Pride Corp PPC

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Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Who’s Winning the Quick-Serve Restaurant Chicken Wars? Pilgrim’s Pride! Shares Compelling

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.

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Company Profile

Business Description

Pilgrim's Pride is the second- largest poultry producer in the U.S. (62% of 2020 sales), Europe (27%), and Mexico (11%). The 2019 purchase of Tulip, the U.K.'s largest hog producer, marks the firm's entrance into the pork market, which represented 11% of 2020 sales. Pilgrim's sells its protein to chain restaurants, food processors, and retail chains under brand names Pilgrim's, Country Pride, Gold'n Plump, and Just Bare. 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.

Contact
1770 Promontory Circle
Greeley, CO, 80634-9038
T +1 970 506-8000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 26, 2021
Stock Type Slow Growth
Employees 54,700

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