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Pilgrim's Pride (PPC) Down 6.2% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Pilgrim's Pride Corporation (PPC - Free Report) . Shares have lost about 6.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Fourth-Quarter 2017 Results

Pilgrim's Pride reported better-than-expected results for fourth-quarter 2017.

Earnings

The company’s quarterly earnings of 58 cents per share surpassed the Zacks Consensus Estimate of 53 cents. Also, the bottom line comfortably exceeded the year-ago tally of 28 cents per share.

Adjusted earnings for 2017 came in at $2.79 per share, missing the Zacks Consensus Estimate of $2.82.

However, the bottom line came in higher than $1.73 recorded in the prior-year period.

Revenues

In the reported quarter, Pilgrim's Pride generated net revenues of $2,742.4 million, up 15.7% year over year. In addition, the top line comfortably surpassed the Zacks Consensus Estimate of $2,557 million.

Revenues from U.S. operations came in at $1,886.1 million, up 18% year over year. Mexican operations generated revenues of $333.8 million in the reported quarter, up 8% year over year. Top-line results from the company’s European operations also improved 12.9% year over year to $522.5 million.

Aggregate revenues in 2017 came in at $10.77 billion, up 9% year over year. The top line also outpaced the Zacks Consensus Estimate of $9.45 billion.

Costs/Margins

Pilgrim's Pride's cost of sales in the reported quarter increased 15.8% year over year to $2,480.5 million. Gross margin contracted 20 basis points (bps) year over year to 9.5%.

Selling, general and administrative expenses flared up 30.2% year over year to $105.5 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin came in at 8.8%, expanding 10 bps year over year.

Gross margin for 2017 was 13.7%, up 250 bps year over year. Adjusted EBITDA margin in the year came in at 12.9%, advancing 250 basis points year over year.

Balance Sheet/Cash Flow

Pilgrim's Pride exited the fourth quarter with cash and cash equivalents of approximately $581.5 million, up from $292.5 million recorded on Dec 25, 2016. Long-term debt (net of current portion) was $2,635.6 million, as against $1,396.1 million as of Dec 25, 2016.

In the reported quarter, the company generated $801.3 million of cash from its operating activities, up 0.7% year over year. Capital spending totaled $339.9 million compared to $341 million incurred in the year-ago quarter.

Outlook

Pilgrim's Pride noted that the Moy Park acquisition (September 2017) will make it a globally popular chicken and chicken-based Prepared Foods producer over the long term. Moreover, the successful integration of GNP Company (January 2017) will bolster the company’s revenues and profitability in the quarters ahead. Also, completion of the $141-million investment program is anticipated to boost the company’s competency.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate have trended upward during the past month. There have been three revisions higher for the current quarter.

VGM Scores

At this time, PPC has an average Growth Score of C. Its Momentum is doing a bit better with a B. The stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for momentum and to a lesser degree growth.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise PPC has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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