Pilgrim's Pride Corporation PPC has reached a significant support level and could be a good pick for investors from a technical perspective. The company recently broke through its 50-day simple moving average (SMA) and is currently trading above both its 200-day and 50-day SMA, which suggests a long-term bullish trend. SMA is employed to ascertain whether the price of a security is trending upward or downward.
Closing at $44.58 on Friday, the stock is trading higher than its 200-day and 50-day SMA of $36.50 and $44.17, respectively, highlighting a sustained upward trend.
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PPC has displayed a decent performance so far, with its shares appreciating 16.7% in three months. This performance significantly outpaces the Zacks Food - Meat Products industry, which has seen growth of 5.2%. The company’s focus on branded offerings and strategic key customer partnerships play a crucial role in driving growth. These initiatives have helped the company outperform the S&P 500 index, which grew 3% during the same period.
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Growth Strategies Bolstering PPC’s Performance
Pilgrim's Pride has strategically emphasized operational efficiency and portfolio diversification to strengthen its market position. The company's focus on enhancing its U.S. and Mexican operations demonstrates its commitment to growth and excellence. The expansion of facilities like the Douglas and Sumter protein conversion facilities in the United States is crucial for supporting the rising demand from key customer partnerships and the growing pet food segment.
In addition to expansion, the company is focused on cost-cutting measures, including optimizing operational processes and reducing grain input costs, which have bolstered margins and profitability. Enhanced operational efficiencies and a favorable market environment for private brands are supporting overall performance.
The company is also on track to strengthen key customer partnerships through targeted marketing and branding efforts. This includes working closely with major customers to offer promotional activities and innovative products, which help drive sales and increase market share. The focus on branded offerings through successful product lines like Just Bare and Pilgrim’s has been instrumental in capturing consumer interest and growing the company’s footprint in the market.
In the second quarter of 2024, Pilgrim’s Pride demonstrated strong financial performance, driven by a combination of reduced production costs and market recovery. This was due to decreased grain input costs and enhanced operational efficiencies. The company also benefited from a recovery in the commodity chicken market. These factors collectively contributed to stronger margins and overall profitability, especially in key segments such as Big Bird, where the reduction in production costs played a crucial role in driving financial success.
Pilgrim's Pride also maintained positive momentum in the food service distribution channel, recording increased volume and sales across both commercial and non-commercial subchannels during the quarter. The quick-service restaurant (QSR) category led the volume growth, reflecting consumers' continued preference for affordable meal options. This growth in QSR, along with the broader food service distribution success, underscores Pilgrim's Pride's resilience and ability to effectively serve a diverse customer base in the food service industry.
PPC Stock’s Attractive Valuation
PPC is currently trading at a price-to-earnings multiple of 9.31x, below the Zacks Food - Meat Products industry multiple of 15.47x. The stock is undervalued compared with its industry peers, offering compelling value to investors looking for exposure to the Consumer Staples sector. PPC's Value Score of A underscores its appeal as a potential investment.
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PPC's Roadblocks
The recent rise in egg sets has raised concerns about having too much supply in the fall, which could create issues for Pilgrim's Pride. If production grows faster than demand, it might lead to lower prices in the poultry market, squeezing the company's profit margins. This could hurt Pilgrim's Pride's profitability as prices drop due to oversupply.
In the second quarter of 2024, Pilgrim's Pride also faced difficulties with its exports, as there was a drop in the volume of products sent abroad, especially bone-in and boneless dark meat. This was because strong domestic demand reduced the need for exports. The absence of progress in lifting China's import restrictions further complicated the export environment. The company is inclined toward monitoring bird health, domestic dark meat demand and exchange rates to identify potential export opportunities.
Investment Guidance on PPC Stock
Investors may consider PPC stock due to its appealing valuation, favorable technical indicators and robust growth potential. The company has positioned itself to capitalize on its segments, with a greater focus on innovation, operational efficiency and building strategic market share in key areas.
However, recent challenges with exports, including a decline in the volume of products sent abroad, mean that careful monitoring of the company's progress in overcoming these issues is essential. For current investors, holding onto PPC stock appears to be a prudent choice, while potential shareholders could wait for a better entry time. PPC currently holds a Zacks Rank #3 (Hold).
Three Other Stocks to Consider
Here, we have highlighted three other top-ranked food stocks, namely, The Chef's Warehouse CHEF, Ollie's Bargain Outlet OLLI and Flowers Foods FLO
The Chef’s Warehouse, which engages in the distribution of specialty food products, currently sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimated figure for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, currently carries a Zacks Rank #2. OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.
The Zacks Consensus Estimated figure for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.7% and 12.71%, respectively, from the year-earlier levels.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings calls for growth of around 0.9% and 5%, respectively, from the year-ago reported numbers.
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