Why Is Pilgrim’s Pride (PPC) Down 5.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Pilgrim’s Pride (PPC). Shares have lost about 5.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Pilgrim’s Pride 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.

Pilgrim’s Pride’s Q1 Earnings Decline, Sales Up Y/Y

Pilgrim’s Pride Corporation reported first-quarter 2020 results, with the bottom line declining year over year. Nevertheless, the top line increased on a year-over-year basis. The upside can be attributed to improved performance in the United States and European operations. Let’s take a closer look.

Q1 in Detail

Quarterly adjusted earnings of 18 cents per share declined 48.6% from the figure reported in the year-ago quarter. The metric includes a one-time gain on case settlement of 9 cents per share. Including this, earnings per share came in at 27 cents.The downside might have been caused by lower margins. The Zacks Consensus Estimate was pegged at 17 cents.

In the reported quarter, Pilgrim’s Pride generated net sales of $3,074.9 million, up 12.9% year over year. Results were backed by higher sales in the United States and European operations.

Revenues in the U.S. operations amounted to $1,926.9 million, up 2.3% year over year. The upside was driven by strong performance across all segments. Further, the company’s business model along with promptness in changing mix aided growth.

Mexican operations generated revenues of $325.8 million in the reported quarter, down 0.1% year over year. The downtick was caused by weak macro conditions in Mexico, which more than offset growth in Prepared Foods in the region.

Revenues from European operations surged 60% year over year to $822.3 million. The uptick was driven by increased demand across retail as well as robust pork exports mainly to China. Also, the company’s initial execution of operational improvements bodes well. However, lower demand in foodservice acted as a deterrent.

Pilgrim’s Pride’s overall cost of sales in the reported quarter increased 15.6% year over year to $2,897.8 million. Moreover, gross profit fell 19.1% year over year to $177.1 million. Also, gross margin deteriorated 2.7 percentage points to 5.76%.

Further, adjusted EBITDA was $165.5 million, down 19% year over year. Adjusted EBITDA margin of 5.4% declined 2.1 percentage points on a year-over-year basis.

Other Financial Details

Pilgrim’s Pride exited the quarter with cash and cash equivalents of approximately $511.2 million, long-term debt (less current maturities) of $2,621 million and total shareholders’ equity of $2,476.5 million. Further, the company generated $21.1 million as cash from operating activities for three months ended Mar 29.

Growth Efforts on Track

Pilgrim’s Pride is committed toward boosting operations through Key Customer strategy as well as augmenting capacities and capabilities. The company continues to engage in evolving the portfolio with product diversification.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

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