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Pilgrim’s Pride (PPC) Q4 Earnings: Will Chicken Woes Persist?

Zacks

Pilgrim's Pride Corporation PPC is scheduled to release fourth-quarter 2018 results on Feb 13, after market close. The company’s earnings have lagged the Zacks Consensus Estimate in three out of the trailing four quarters, with average negative surprise of 14%. Let’s see how things are placed ahead of the upcoming quarterly results for this renowned food company.

Strong European Unit & Other Growth Efforts

Pilgrim's Pride’s European business is expanding on the back of gains from acquired operations as well as focus on diversification into new markets. The region is also gaining from a strong business model, robust customer relationships as well as better synergy capture. Moreover, efforts such as capacity optimization and expansion are likely to continue boosting revenues in this unit.

Further, the company’s customer centric approach has enabled it to come up with unique offerings that provide it competitive advantages. In fact, its focus on key customers is aiding portfolio refinement and creating competitive advantages over peers. Progressing on such lines, the company is expanding in the fresh food offerings space.

In fact, the launch of fresh chicken products under the premium Pilgrim's brand is receiving favorable consumer response. Further, the company is on track to expand gluten-free products as well as to grow in the alternative protein products space, such as plant-based protein.

Apart from this, Pilgrim’s Pride is steadily augmenting marketing support of brands as they expand and enter new regions. Additionally, the company resorts to frequent supply chain improvements to enhance efficiency and reduce costs.

Pilgrim's Pride Corporation Price, Consensus and EPS Surprise


Pilgrim's Pride Corporation Price, Consensus and EPS Surprise | Pilgrim's Pride Corporation Quote

Market Volatility & High Costs Likely to Dent Performance

While the aforementioned factors are encouraging, Pilgrim's Pride faces significant hurdles that are likely to hurt the upcoming quarterly performance. We note that the company is witnessing a challenging pricing environment for commodity chicken in the United States. Moreover, management is concerned regarding the reduced demand for commodity chicken, considering the higher availability of other meat-based protein. Additionally, a difficult marketing environment in Mexico, stemming from excess supply conditions, is a worry.

To top these, expanding cost of sales is a significant hurdle. Notably, cost of sales rose 9.2% and 12.5% year on year during the third and the second quarters of 2018, respectively. Such factors have weighed on the company’s gross profit and gross margin performance. Rising costs, if unchecked, can continue to hurt profits.

Estimates Reveal Dull Prospects

The Zacks Consensus Estimates for the fourth-quarter earnings is currently pegged at 18 cents. This reflects a decline of almost 69% from the year-ago quarter’s reported figure of 58 cents. The estimate has been stable in the past 30 days.

Further, the Zacks Consensus Estimates for net revenues is pegged at $2,719 million, depicting a fall of roughly 0.8% from $2,742 million in the prior-year quarter.

What Does the Zacks Model Predict?

Our proven model doesn’t show that Pilgrim's Pride can beat bottom-line estimates this quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Pilgrim's Pride carries a Zacks Rank #3, its Earnings ESP of 0.00% makes us less confident about an earnings surprise. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that they have the right combination of elements to beat earnings.

Turning Point Brands, Inc TPB has Earnings ESP of +11.11% and a Zacks Rank #2.

Nomad Foods Ltd. NOMD has an Earnings ESP of +1.45% and a Zacks Rank #2.

Ollie's Bargain Outlet Holdings, Inc. OLLI has an Earnings ESP of +0.21% and a Zacks Rank #2.

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