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Bear Of The Day: Pilgrim's Pride Corp (PPC)

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Pilgrim's Pride Corporation (PPC - Free Report) is a Zacks Rank #5 (Strong Sell) after posting a recent miss of the Zacks Consensus Estimate.  The estimates have slipped but it may still be worth a deeper look. As the Bear of the Day, we look at why this stock is a Zacks Rank #5 (Strong Sell).

Description

Pilgrim's Pride is one of the largest chicken companies in the US, Mexico and Puerto Rico. The company's fresh chicken retail line is sold throughout the US, throughout Puerto Rico, and in the northern and central regions of Mexico. Its prepared chicken products meet the needs of some of the largest customers in the food service industry across the US. Additionally, the Company exports commodity chicken products to over 90 countries. As a vertically integrated company, it controls every phase of the production of its products. The company operates feed mills, hatcheries, processing plants and distribution centers in US, Puerto Rico and Mexico.

Style Scores

Sometimes I look at the Zacks Style Scores and make a rash judgment about a stock.  In the case of PPC, I see an A for Growth and an A for Value.  That tells me something interesting is happening here.  The F for Momentum tells me that the company recently missed an earnings report.

Recent Earnings

The last two reports for PPC have not been that good.  The company has missed by a penny in each of those reports.  The two prior to that were beats, and the beats were much bigger than the misses.

Estimate Movement

The Zacks Rank is really predicated on the revisions of earnings estimates.  When estimates are moving higher, the Zacks Rank follows right along for the ride.  PPC is a Zacks Rank #5 (Strong Sell) and when we look at the recent move in earning estimates we see why that is the case.

The Zacks Consensus Estimate for the current quarter has slid from $0.93 to $0.55.  That is not what we want to see.

The next quarter tells a different story with the Zacks Consensus Estimate moving from $0.35 to $0.40 over the same time period.

Morgan Wallen would call that a little "up down."

Valuation

Despite the misses, investors are looking hard at PPC, and one reason for that is the valuation.  I see a 9x forward earnings multiple which is very low for a stock that is posting year over year revenue growth of 26%.

The price to book of 2.3x is also very low for those value conscious investors out there.  

Finally a price to sales multiple of 0.4x is also ver low.

Margins on a net basis have slipeed the last three quarters in a row and there are some indications that point to another move lower there next quarter as well.  That said, the stock is worth a deeper look, especially if earnings estimates start to turn around.

Chart

 

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