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Pilgrim's Pride (PPC) is Poised on Capacity Expansion Efforts

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Pilgrim's Pride Corporation (PPC - Free Report) is benefiting from focus on strategic growth efforts, including capacity expansions. The company benefits from robust demand for its products in retail and foodservice operations. These factors drove its second-quarter 2022 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate.

The leading poultry producer is battling inflationary environment. Let’s discuss this in details.

Strategic Growth Efforts on Track

The Zacks Rank #3 (Hold) company’s customer-centric approach helped it introduce unique offerings that provide competitive advantages. PPC’s focus on key customers is a pathway for refining its portfolio and creating competitive advantages over its peers. Taking into account its inclination toward profitable growth and impressive market momentum, management made some new investments in the United States. Management is expanding the Athens, GA, facility to improve service levels and boost key customer growth.

Pilgrim's Pride intends to enhance operational excellence improvements via automation throughout its U.S. footprint and construct a protein conversion plant for pet food ingredients in Georgia. The company will develop a Prepared Foods facility in the Southeast USA to support branded growth and diversify its portfolio.

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Pilgrim's Pride has been steadily augmenting the marketing support of its brands as they expand and enter new regions. It resorts to frequent supply chain improvements to enhance efficiency and reduce costs. In this respect, it has been progressing well with developing automation technology for its processing plants. Introducing such advanced technology is expected to increase efficiency and aid in combating labor availability issues.

In sync with its growth strategy, Pilgrim’s Pride acquired Kerry Consumer Foods’ Meats and Meals business in the U.K. and Ireland in September 2021. The acquired business solidifies Pilgrim’s Pride’s footing by operating as a business division under the company’s European operations. The company’s disciplined capital allocation approach to diversify the portfolio, focus on key customers and achieve operational excellence bodes well.

Hurdles on Way

In its second-quarter 2022 earnings call, management highlighted that its European business witnessed major inflationary pressures. This and continued volatility from the Russia-Ukraine conflict led to softness in the consumer environment. Although the company is focused on implementing supply chain solutions, it is apprehensive about the rising pressures from inflation.

In addition, Pilgrim's Pride’s Mexico business battled seasonal challenges in live production in its locations. Management expects the region to remain volatile owing to inflationary pressures, overall business seasonality and evolving global protein complex.

We believe that the upsides mentioned above are likely to keep working for Pilgrim's Pride.

Shares of the company have fallen 4.7% in the past six months compared with the industry’s 19.2% decline.

Stocks to Consider

Some better-ranked stocks are Lancaster Colony (LANC - Free Report) , Hershey (HSY - Free Report) and The J. M. Smucker (SJM - Free Report) .

Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks Rank of 1 (Strong Buy). LANC delivered an earnings surprise of 170% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Lancaster Colony’s current financial year sales and earnings per share (EPS) suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.

Hershey, the largest chocolate manufacturer in North America and a global leader in chocolate and non-chocolate confectionery, presently has a Zacks Rank #2 (Buy). HSY has a trailing four-quarter earnings surprise of 8.7%, on average.

The Zacks Consensus Estimate for Hershey’s sales and EPS for the current financial year suggests respective growth of 13.9% and 14.4% from the year-ago reported figures.

J. M. Smucker, which manufactures and markets branded food and beverage products, carries a Zacks Rank #2. J. M. Smucker has a trailing four-quarter earnings surprise of 20.8%, on average.

The Zacks Consensus Estimate for SJM’s current financial year sales suggests growth of 4.4% from the year-ago period’s reported figure.

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