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Pilgrim's Pride (PPC) Q1 Earnings Lag, Revenues Top Estimates

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Pilgrim's Pride Corporation (PPC - Free Report) reported mixed first-quarter 2018 results.

Earnings/Revenues

Quarterly adjusted earnings came in at 53 cents per share, a penny lower than the Zacks Consensus Estimate. However, the bottom line surpassed the year-ago tally of 38 cents per share.

In the reported quarter, Pilgrim's Pride generated net revenues of $2,746.7 million, up 10.8% year over year. In addition, the top line comfortably surpassed the Zacks Consensus Estimate of $2,593 million.

Revenues from U.S. operations came in at $1,841.1 million, up 6% year over year. The upside came on the back of the company’s case-ready and small bird businesses’ stellar performance.

Mexican operations generated revenues of $361.3 million in the reported quarter, up 27.2% year over year. The upside was driven by robust demand for both Pilgrim’s Pride’s and Del Dia branded chicken products.

Top-line results from the company’s European operations also improved 18.6% year over year to $544.3 million. Successful integration activities of Moy Park buyout (closed in September 2017) primarily boosted Pilgrim's Pride’s European sales.

 

Pilgrim's Pride Corporation Price, Consensus and EPS Surprise

 

Pilgrim's Pride Corporation Price, Consensus and EPS Surprise | Pilgrim's Pride Corporation Quote

 

Costs/Margins

Cost of sales in the reported quarter flared up 10.6% year over year to $2,459 million. However, gross margin expanded by 20 basis points (bps) year over year to 10.5%, on the back of strong top-line performance.

Selling, general and administrative expenses fell 5% year over year to $85.3 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin came in at 9.9%, expanding 70 bps year over year.

Balance Sheet/Cash Flow

Pilgrim's Pride exited the first quarter with cash and cash equivalents of approximately $580.8 million, slightly down from $581.5 million recorded on Dec 31, 2017. Long-term debt (net of current portion) was $2,625.7 million, as against $2,635.6 million recorded in 2017-end.

In the reported quarter, the company provided $0.64 million of cash from its operating activities, in contract of $66.3 million cash secured in the year-ago quarter.  Capital spending totaled $76.7 million compared to $121.6 million incurred in the prior-year quarter.

Outlook

Pilgrim's Pride is poised to grow on the back of its latest acquisitions and recent investments. The company perceives that efficacious integration of Moy Park business and increased operational efficacy will boost its profitability going forward.

Zacks Rank

Pilgrim's Pride currently carries a Zacks Rank #4 (Sell). Rising costs, if unchecked, can dampen the company’s profitability in the upcoming quarters. Moreover, the company continues to face supply side challenges relating to labor constraints as well as feed and logistic issues. Moreover, other headwinds such as stiff industry rivalry and government restrictions on the import and export of fresh chicken products remain major causes of concern.

Stocks to Consider

Some better-ranked stocks in the Zacks Consumer Staples sector are listed below:

Conagra Brands, Inc. (CAG - Free Report) carries a Zacks Rank #2 (Buy). The company has pulled off a positive average earnings surprise of 6.73% for the last four quarters. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Church & Dwight Co., Inc. (CHD - Free Report) holds a Zacks Rank #2. The company has pulled off a positive average earnings surprise of 4.17% for the last four quarters.

Campbell Soup Company (CPB - Free Report) carries a Zacks Rank #2. The company has pulled off a positive average earnings surprise of 1.26% for the last four quarters.

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