We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Pilgrim's Pride Worries Over Commodity Chicken & High Costs
Read MoreHide Full Article
Pilgrim's Pride Corporation (PPC - Free Report) is groveling over a tough commodity chicken market and rising costs. These headwinds lingered in fourth-quarter 2018 and may pose threats to the Zacks Rank #4 (Sell) company in the near term. On that note, let’s take a closer look at the factors hurting Pilgrim’s Pride, and see if any growth efforts are in place.
Roadblocks to Growth
Pilgrim’s Pride has been witnessing tough commodity chicken market conditions in the United States for a while. This along with adverse weather conditions across some locations dented revenues from the company’s U.S. operations in the fourth quarter of 2018.
Moreover, management is concerned about reduced demand of commodity chicken, considering high availability of other meat-based protein. The United States Department of Agriculture (USDA) predicts that total production growth of the chicken industry in 2019 will be lower than the 2018 levels, which remains a matter of concern.
Additionally, we note that during the fourth quarter, the company witnessed a decline in revenues from Mexican and European operations. The European region was sluggish due to higher feed inputs stemming from drought conditions. Persistence of such regional headwinds will mar the top line.
Another major roadblock to the company’s performance stems from expanding cost of sales. Rising costs, if unchecked, can continue to hurt profits in the upcoming quarters. In fact, during the fourth quarter of 2018, cost of sales rose 2.6% year over year. Moreover, lower sales and higher cost of sales caused gross profit to slump 57.3%, while gross margin fell 5.3 percentage points to 4.2%. Other players from the meat space, such as Tyson Foods (TSN - Free Report) , are also under pressure due to rising costs.
Coming back to Pilgrim’s Pride, shares of the company are down 7.2% in a year, against the industry’s rise of 11.4%.
Nonetheless, management is relying on growth endeavors such as innovation, augmenting marketing support for brands and improving supply-chain operations through enhanced technology implementation. The company’s Prepared Foods business is performing well on the back of strong brands. We expect such upsides to aid the company in the forthcoming periods.
Interested in Consumer Staples Stocks? Check These
United Natural Foods, Inc (UNFI - Free Report) has a long-term EPS growth rate of 7.4% and holds a Zacks Rank #2 (Buy) at present.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
Image: Bigstock
Pilgrim's Pride Worries Over Commodity Chicken & High Costs
Pilgrim's Pride Corporation (PPC - Free Report) is groveling over a tough commodity chicken market and rising costs. These headwinds lingered in fourth-quarter 2018 and may pose threats to the Zacks Rank #4 (Sell) company in the near term. On that note, let’s take a closer look at the factors hurting Pilgrim’s Pride, and see if any growth efforts are in place.
Roadblocks to Growth
Pilgrim’s Pride has been witnessing tough commodity chicken market conditions in the United States for a while. This along with adverse weather conditions across some locations dented revenues from the company’s U.S. operations in the fourth quarter of 2018.
Moreover, management is concerned about reduced demand of commodity chicken, considering high availability of other meat-based protein. The United States Department of Agriculture (USDA) predicts that total production growth of the chicken industry in 2019 will be lower than the 2018 levels, which remains a matter of concern.
Additionally, we note that during the fourth quarter, the company witnessed a decline in revenues from Mexican and European operations. The European region was sluggish due to higher feed inputs stemming from drought conditions. Persistence of such regional headwinds will mar the top line.
Another major roadblock to the company’s performance stems from expanding cost of sales. Rising costs, if unchecked, can continue to hurt profits in the upcoming quarters. In fact, during the fourth quarter of 2018, cost of sales rose 2.6% year over year. Moreover, lower sales and higher cost of sales caused gross profit to slump 57.3%, while gross margin fell 5.3 percentage points to 4.2%. Other players from the meat space, such as Tyson Foods (TSN - Free Report) , are also under pressure due to rising costs.
Coming back to Pilgrim’s Pride, shares of the company are down 7.2% in a year, against the industry’s rise of 11.4%.
Nonetheless, management is relying on growth endeavors such as innovation, augmenting marketing support for brands and improving supply-chain operations through enhanced technology implementation. The company’s Prepared Foods business is performing well on the back of strong brands. We expect such upsides to aid the company in the forthcoming periods.
Interested in Consumer Staples Stocks? Check These
Estee Lauder (EL - Free Report) , with a long-term earnings per share (EPS) growth rate of 12.5%, sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
United Natural Foods, Inc (UNFI - Free Report) has a long-term EPS growth rate of 7.4% and holds a Zacks Rank #2 (Buy) at present.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
See Stocks Today >>