Pilgrim’s Pride (PPC) is about to expand its capabilities
Pilgrim’s Pride Society PPC benefits from the focus on strategic growth efforts, including capacity expansions. The company is enjoying strong demand for its products in retail and food service businesses. These factors drove its second-quarter 2022 results, with the high and low rising year over year and beating Zacks’ consensus estimate.
The leading poultry producer is struggling with an inflationary environment. Let’s discuss it in detail.
Strategic growth efforts on track
Zacks Rank #3 (Hold) company’s customer-centric approach has helped it introduce unique offerings that provide competitive advantages. PPC’s focus on key customers is one way to refine its portfolio and create competitive advantages over its peers. Given its penchant for profitable growth and impressive market momentum, management has made new investments in the United States. Management is expanding the Athens, Georgia plant to improve service levels and drive growth for key customers.
Pilgrim’s Pride intends to improve operational excellence through automation across its U.S. footprint and build a protein conversion plant for pet food ingredients in Georgia . The company will develop a prepared foods plant in the southeastern United States to support brand growth and diversify its portfolio.
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Pilgrim’s Pride has steadily increased marketing support for its brands as they expand and enter new regions. It uses frequent supply chain improvements to improve efficiency and reduce costs. In this regard, it is making good progress in developing automation technologies for its processing plants. The introduction of such advanced technology is expected to increase efficiency and help combat labor availability issues.
In line with its growth strategy, Pilgrim’s Pride acquired the Meats and Meals business of Kerry Consumer Foods in the UK and Ireland in September 2021. The acquired business strengthens Pilgrim’s Pride’s position by operating as a commercial division under the company’s European operations. The company’s disciplined approach to capital allocation to diversify the portfolio, focus on key customers and achieve operational excellence bodes well.
Obstacles in the way
In its second quarter 2022 earnings call, management stressed that its European business was experiencing major inflationary pressures. This, together with the ongoing volatility of the Russian-Ukrainian conflict, has eased the consumer environment. Although the company is focused on implementing supply chain solutions, it fears mounting inflation pressures.
Additionally, Pilgrim’s Pride’s Mexican business faced seasonal challenges in live production at its locations. Management expects the region to remain volatile due to inflationary pressures, the overall seasonality of business and changes in the global protein complex.
We think the perks mentioned above will likely continue to work for Pilgrim’s Pride.
Shares of the company have fallen 4.7% over the past six months, compared to a 19.2% drop in the industry.
Actions to consider
Some higher ranked stocks are Lancaster Colony LANC, Hershey HSY and The JM Smucker SJM.
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks rating of 1 (Strong Buy). LANC achieved a 170% profit surprise in the latest reported quarter. You can see the full list of today’s Zacks #1 Rank stocks here.
Zacks consensus estimate for Lancaster Colony’s current year sales and earnings per share (EPS) suggests growth of 9.6% and 38.3%, respectively, over corresponding figures for the ‘last year.
Hershey, North America’s largest chocolate maker and a global leader in chocolate and non-chocolate confectionery, currently has a Zacks rank of No. 2 (buy). HSY has an earnings surprise for the last four quarters of 8.7% on average.
Zacks’ consensus estimate for Hershey’s sales and EPS for the current fiscal year suggests growth of 13.9% and 14.4%, respectively, from numbers reported a year ago.
JM Smucker, which manufactures and markets branded food and beverage products, carries a No. 2 Zacks rank. JM Smucker has a trailing four-quarter earnings surprise of 20.8% on average.
Zacks’ consensus estimate for SJM’s current-year sales suggests growth of 4.4% from the figure reported a year ago.
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