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Pilgrim's Pride Faces Macroeconomic Perils, Prospects Bleak
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We issued an updated research report on the premium consumer goods company Pilgrim's Pride Corporation (PPC - Free Report) on Sep 5, 2016. The company is engaged in processing, production, marketing and distribution of frozen, fresh as well as value-added chicken products. Since its inception in 1946, Pilgrim's Pride has significantly improved the scale of its operations with strategic moves. However, it currently faces certain risks arising from external headwinds.
Existing Business Issues
Pilgrim's Pride conducts its business in a highly competitive industry. Intense competition enhances the bargaining power of consumers and exposes the company to risks of market share loss. Moreover, in order to increase or retain demand from prospective end users, Pilgrim's Pride needs to ensure good product quality and prices as well as maintain higher corporate transparency by ascertaining health and wellness aspects of products. To this end, the company has made huge investments in new growth projects or research & development. However, such costs add to its existing debt burden. Also, the company’s operational efficacy and product supplying capability have both been adversely affected by the sudden outbreak of livestock diseases within the meat industry.
Even so, Pilgrim's Pride’s earnings are highly sensitive to market price as well as availability of certain products such as soybean meal, corn and sorghum. Any sudden supply-demand imbalance or fluctuations in price of these materials might significantly raise the company’s operational expenses. This will, in turn, weigh on this consumer goods company’s bottom line in the quarters ahead. Notably, international operations expose Pilgrim's Pride to several economic, political and environmental headwinds. For instance, appreciation of the U.S. dollar has been affecting the company’s international revenues and margins of late.
A Few Avenues
Though we remain apprehensive about the negatives hampering this Zacks Rank #4 (Sell) stock’s results in the near term, we expect certain favorable developments to partially offset such adversities. For instance, greater product portfolio diversification is anticipated to shield the company from variable industry specific headwinds. At present, Pilgrim's Pride is trying to capture the growing market demand for natural food products such as organic and ABF chicken. Improved sales of natural food products are estimated to boost the company’s revenues in the near term. Moreover, it expects to accrue $185 million of operational improvement through cost savings and effective generation of cash flow by the end of 2016.
Stocks to Consider
Some better-ranked stocks within the industry include Sanderson Farms, Inc. , Tyson Foods, Inc. (TSN - Free Report) and Activision Blizzard, Inc. . While both Sanderson Farms and Tyson Foods sport a Zacks Rank #1 (Strong Buy), Activision Blizzard currently carries a Zacks Rank #2 (Buy).
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Pilgrim's Pride Faces Macroeconomic Perils, Prospects Bleak
We issued an updated research report on the premium consumer goods company Pilgrim's Pride Corporation (PPC - Free Report) on Sep 5, 2016. The company is engaged in processing, production, marketing and distribution of frozen, fresh as well as value-added chicken products. Since its inception in 1946, Pilgrim's Pride has significantly improved the scale of its operations with strategic moves. However, it currently faces certain risks arising from external headwinds.
Existing Business Issues
Pilgrim's Pride conducts its business in a highly competitive industry. Intense competition enhances the bargaining power of consumers and exposes the company to risks of market share loss. Moreover, in order to increase or retain demand from prospective end users, Pilgrim's Pride needs to ensure good product quality and prices as well as maintain higher corporate transparency by ascertaining health and wellness aspects of products. To this end, the company has made huge investments in new growth projects or research & development. However, such costs add to its existing debt burden. Also, the company’s operational efficacy and product supplying capability have both been adversely affected by the sudden outbreak of livestock diseases within the meat industry.
Even so, Pilgrim's Pride’s earnings are highly sensitive to market price as well as availability of certain products such as soybean meal, corn and sorghum. Any sudden supply-demand imbalance or fluctuations in price of these materials might significantly raise the company’s operational expenses. This will, in turn, weigh on this consumer goods company’s bottom line in the quarters ahead. Notably, international operations expose Pilgrim's Pride to several economic, political and environmental headwinds. For instance, appreciation of the U.S. dollar has been affecting the company’s international revenues and margins of late.
A Few Avenues
Though we remain apprehensive about the negatives hampering this Zacks Rank #4 (Sell) stock’s results in the near term, we expect certain favorable developments to partially offset such adversities. For instance, greater product portfolio diversification is anticipated to shield the company from variable industry specific headwinds. At present, Pilgrim's Pride is trying to capture the growing market demand for natural food products such as organic and ABF chicken. Improved sales of natural food products are estimated to boost the company’s revenues in the near term. Moreover, it expects to accrue $185 million of operational improvement through cost savings and effective generation of cash flow by the end of 2016.
Stocks to Consider
Some better-ranked stocks within the industry include Sanderson Farms, Inc. , Tyson Foods, Inc. (TSN - Free Report) and Activision Blizzard, Inc. . While both Sanderson Farms and Tyson Foods sport a Zacks Rank #1 (Strong Buy), Activision Blizzard currently carries a Zacks Rank #2 (Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>