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Pilgrim's Pride (PPC) Misses on Q1 Earnings, Tops Revenues

Premium consumer goods company, Pilgrim's Pride Corporation PPC reported mixed first-quarter 2017 results.

Over the last one month, this Zacks Rank #2 (Buy) stock has yielded a return of 12.34%, outperforming 3.10% growth recorded by the Zacks categorized Food - Meat Products industry.

The company noted that both revenues and earnings in the reported quarter improved sequentially on the back of solid U.S. operations and sound Mexican business performance amid negative foreign exchange impact.

Pilgrim's Pride currently estimates to generate annualized cost synergy worth $30 million from the GNP Company buyout (closed in Jan 2017), which is higher than the prior projection of $20 million. Notably, the company even upgraded its capital investment target for 2017 from $220 million to $250 million.

Quarter in Details

Earnings

The company’s quarterly earnings of 38 cents per share missed the Zacks Consensus Estimate of 43 cents. Additionally, the figure is lower than the year-ago tally of 46 cents per share.

However, the quarterly bottom-line performance improved 35.7% sequentially.

Revenues

In the reported quarter, Pilgrim's Pride generated net revenue of $2,020.5 million, up 2.9% year over year. The top line also surpassed the Zacks Consensus Estimate of $2,014 million.

Revenues from the company's U.S. operations, which account for nearly 85.9% of the total revenue, climbed 4% year over year. Revenues from the Mexican business – 14.1% of the total revenue – were down 2.9% year over year.

The quarterly top-line performance improved 5.9% sequentially.

Costs/Margins

Pilgrim's Pride's cost of sales increased 4.6% year over year to $1,805.3 million. Selling, general and administrative expenses advanced 28.8% year over year to $62.9 million.

Gross margin contracted 140 basis points (bps) year over year to 10.7%. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin came in at 10.1%, down 180 bps year over year.

Balance Sheet/Cash Flow

Pilgrim's Pride exited the quarter with cash and cash equivalents of approximately $30.8 million, down from $120.3 million at the end of 2016. Long-term debt (net of current portion) was $1,347 million as against $1,011.9 million as of Dec 25, 2016.

In the reported quarter, the company generated $61.5 million of cash from its operating activities, down 66.9% year over year. Capital spending totaled $114.5 million compared to $37.1 million incurred in the year-ago quarter.

Outlook

Pilgrim's Pride is well poised to boost its near-term profitability on the back of a well-balanced product portfolio. The company also believes that the advanced product offerings under GNP Company’s brands would increase its market demand in the quarters ahead. Also, the capital investments programs are anticipated to generate benefits moving ahead.  

Other Stocks to Consider

Other similarly-ranked stocks in the industry are listed below:

Blue Buffalo Pet Products BUFF has an average earnings surprise of 6.83% for the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aramark Holdings Corp ARMK generated an average earnings surprise of 3.16% over the last four quarters.

Conagra Brands, Inc. CAG has an average earnings surprise of 10.66% for the past four quarters.

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