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Why is Pilgrim's Pride (PPC) Down 7.4% Since its Last Earnings Report?

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It has been about a month since the last earnings report for Pilgrim's Pride Corporation (PPC - Free Report) . Shares have lost about 7.4% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is PPC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Pilgrim's Pride reported mixed results for first-quarter 2018.

Earnings/Revenues

Quarterly adjusted earnings came in at 53 cents per share, beating the Zacks Consensus Estimate by a penny. However, the bottom line came in higher than 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. This upswing 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 the Moy Park buyout (closed in September 2017) primarily boosted Pilgrim's Pride's European sales.

Costs/Margins

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

Selling, general and administrative expenses dipped 5% year over year to $85.3 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin came in at 9.9%, advancing 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, marginally 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 expects that strategic integration of the Moy Park business and increased operational efficacy will boost its profitability, moving ahead.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There has been one revision lower for the current quarter.

VGM Scores

At this time, PPC has a poor Growth Score of F, however its Momentum is doing a bit better with a D. The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. Interestingly, PPC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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