Pilgrim’s Pride (PPC) has seen
some big action on recent Friday’s, carries a great valuation
and will be reporting earnings soon. It is a Zacks Rank #1
(Strong Buy).
It is the Bull of the Day.
I Feel Like Chicken Tonight
If the title line of this section is lost on you then I am
showing my age a bit. That was a popular tag line from a
commercial in the 80’s but it’s clear that the sentiment still
rings true.
With a 19% share of the domestic market, Pilgrim’s Pride has
a firm grip on second place behind Tyson’s 22%. The 36
million bird weekly capacity also tells you that plenty of
people are eating chicken.
Company Description
Pilgrim’s Pride produces, processes and markets
fresh, frozen, and value-added chicken
products in the United States, Mexico, and Puerto Rico. The
company was founded in 1945 and is headquartered in Greeley,
Colorado. As of December 28, 2009, Pilgrim’s Pride
Corporation operates as a subsidiary of JBS USA Holdings,
Inc.
Earnings History
Looking to the earnings history, I see a stock that has
beaten
the number in two of the three most recent reports. The most
recent quarter
was
a miss of $0.02, which translated into a negative earnings
surprise of 8.7%. The two previous quarters had the analyst
guessing where the number was going to come in and they were
pretty light. The September 2012 quarter was s beat of $0.11
or 183%, and that was followed up by an even more impressive
$0.17 beat for the December 2012 quarter. That translated to
a beat of 212%, which isn’t exactly chicken feed.
Not a Small Chicken
PPC has approximately 37,500 employees and 30 hatcheries.
They also have 3,900 growers and 26 feed mills with
production facilities throughout the Southeast of the United
States, Mexico and Puerto Rico.
The company sells to a wide range of food service companies
like US Foodservice, Yum Brands, Wendy’s, Burger King and
ConAgra Foods. on the retail side, PCC sells to grocers like
Walmart, Publix, Kroger and SuperValu among others.
Earnings Estimates Tick Higher
Estimates for FY2013 have been moving higher and higher. The
2013 calendar year started out with the Zacks Consensus
sitting at $0.86, but that number jumped to $1.31 in April,
and then again to $1.49 in May and now sits at $1.65. That
is some excellent growth of nearly 100% in just six months.
The picture for 2014 is a little less clear, but still shows
some growth. The Zacks Consensus for next year started the
year at $1.18 and ticked higher to $1.22 in April. A big move
up to $1.41 the following month and a subsequent move to
$1.47 at the current level.
Valuation
The valuation picture for PPC is a good one. With a trailing
PE of 20.8x the stock trades at a very small premium to the
industry average of 19.5x. Not that great, but not that bad
either. The impressive valuation metric is the forward PE of
9.3x compared to the 18x industry average. That is a
significant discount for such a large player in the industry.
The price to book of 4.1x carries a small premium to the
3.6x metric for the industry. Price to sales of 0.5x is only
a fraction of the 2.4x industry average, so lots of room to
expand there.
The Chart
The year to date price chart of PPC stock shows a few recent
big up days. Both were more than 10% moves and both came on
Friday’s in June. Last Friday, 7/5 saw a surge of buying at
the close, but nothing like the recent big moves. Is it at
all a coincidence that PPC is the Bull of the Day on this
second Friday in July? Well, I am not a believer in Easter
Bunny or coincidences, just merely the appearance of said
bunny and coincidences. How else to do explain all those egg
hunts, chocolates and foam bunny treats? As for the stock, I
like it here and beyond the August 1, 2013 earnings release.
Brian Bolan is a Stock Strategist
for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor
service, a Buy and Hold service where he recommends the
stocks in the portfolio.
Brian is also the editor of Breakout Growth
Trader
a trading service that focuses on small cap stocks and
also
carries
a risk limiting strategy. Subscribers get daily emails along
with
buy, and sell alerts.
Follow Brian Bolan on twitter at
@BBolan1
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