We expect Pilgrim's Pride Corporation (PPC) to beat expectations when it reports fourth-quarter and full-year 2014 results on Feb 12 before the market opens.
Why a Likely Positive Surprise?
Our proven model shows that Pilgrim's Pride is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +11.11%. This is a meaningful and leading indicator of a likely positive earnings surprise for the company.
Zacks Rank: Pilgrim's Pride carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings.
The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
What is Driving the Better-than-Expected Earnings?
For the fourth quarter, Pilgrim's Pride expects superior financial results on the back of three primary business level strategies. These approaches revolve around generation of higher shareholder value, inorganic expansion and augmentation of operational efficiency. Based on these policies, the company has used its strong cash reserves for several productive investments with an aim to generate higher economic surplus in the fourth quarter of 2014. Backed by such dynamic initiatives, Pilgrim's Pride predicts higher sales for its ready-to-cook chicken products in the fourth quarter.
After considering the impact from the U.S. pricing environment, the company anticipates experiencing higher spot prices for its products in the fourth quarter. Consequently, assuming demand for meat wings to scale higher during the holidays, favorable pricing outcomes are expected to enhance Pilgrim's Pride’s top line in the quarter.
Notably, despite foreseeing short-term market volatilities, Pilgrim's Pride has not projected any fall in its yield for fourth-quarter 2014. Also, the company expects a decline in its overall cost of production, due to lower feed costs driven by record soybean and corn production in the third quarter.
Other 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:
The Madison Square Garden Company (MSG), with an Earnings ESP of +17.07% and a Zacks Rank #1.
Boyd Gaming Corporation (BYD), with an Earnings ESP of +16.67% and a Zacks Rank #2.
Live Nation Entertainment, Inc. (LYV), with an Earnings ESP of +5.00% and a Zacks Rank #2.
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