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Pilgrim's Pride: More Trouble Ahead?

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On May 15, we issued an updated research report on the premium consumer goods company Pilgrim's Pride Corporation (PPC - Free Report) .

Over the past month, this Zacks Rank #4 (Sell) stock has lost 13.6%, wider than the 2.7% loss recorded by the industry.

 

Let's dig a little deeper into the stock for gaging the prevailing problems affecting its performance.

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Ailing Factors

Increased demand for plant-based protein products has cast a pall over the global meat-product market. Per the U.S. Department of Agriculture, supply for poultry (including broiler, turkey and others) in 2018 is estimated at 49,666 million pounds, roughly 0.1% below the previous projection, while demand will likely be 40,789 million pounds, down 0.1% from the prior forecasts.

Escalating regulatory controls and numerous promotional moves, introduced by the medical community in favor of vegetarian sources of protein, might hurt revenues and profitability of meat-product companies like Pilgrim’s Pride, Hormel Foods Corp. (HRL - Free Report) , Sanderson Farms, Inc. (SAFM - Free Report) and Flowers Foods, Inc. (FLO - Free Report) .

Moreover, it should be noted that Pilgrim’s Pride’s profitability is highly sensitive to market price, as well as the availability of certain products such as soybean meal, corn and sorghum.Any supply-demand imbalance or fluctuations in the prices of these intermediate products might significantly escalate the company’s operational expenses in the quarters ahead.

Also, other headwinds like stiff industry rivalry, outbreak of a livestock disease or impact of unfavorable climatic conditions remain causes of concern for the company.

Over the past 30 days, the Zacks Consensus Estimate for the company’s earnings moved down 1.3% to $3 for 2018 and 2.9% to $3.01 for 2019.

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