Premium consumer goods company Pilgrim's Pride Corporation (NASDAQ:PPC) reported weak second-quarter 2016 (ended Jun 26) results. The underperformance stemmed from several macroeconomic headwinds.
The company’s quarterly earnings of 60 cents per share plunged 35.5% from 93 cents in the year-ago quarter. The reported figure also missed the Zacks Consensus Estimate of 65 cents per share.
The company's net income for the second quarter was $152.9 million as against $241.5 million in the year-ago quarter.
Revenues
In the second quarter, Pilgrim's Pride generated net revenue of $2,028.3 million, down 1.2% year over year. The top line also missed the Zacks Consensus Estimate of $2,033 million.
Revenues from the company's U.S. operations, which account for nearly 82.7% of the total revenue, fell 8.8% year over year. However, revenues from the Mexican business – 17.3% of the total revenue – soared 63.2% year over year.
Costs/Margins
Pilgrim's Pride's cost of sales rose 7.4% year over year to $1,742.2 million. Gross margin fell 690 basis points (bps) year over year to 14.1%. Selling, general and administrative expenses increased 1.4% year over year to $49.5 million.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 33.6% year over year to $282.7 million.
Balance Sheet/Cash Flow
Pilgrim's Pride exited the quarter with cash and cash equivalents of approximately $41 million, down from $439.6 million at year-end 2015. Long-term debt (net of current portion) was $1,118 million as against $985.5 million as of Dec 27, 2015.
In the second quarter, Pilgrim's Pride generated $289 million of cash from its operating activities, down 50.9% year over year. Capital spending totaled $94 million, up 7.2% year over year.
Outlook
Going forward, Pilgrim's Pride aims to improve its business through its customized portfolio strategy, operational excellence, increased value-added exports and superior niche customer relationships. The company aims to boost sales in the near term on the back of growing demand among consumers for natural food products.
Share Price and Zacks Rank
Pilgrim's Pride currently carries a Zacks Rank #5 (Strong Sell). Headwinds such as strong U.S. dollar, outbreak of livestock diseases like Avian Flu, high volatility in consumers’ brand loyalty and sluggish economic growth in some major emerging markets are currently weighing over the company’s financials. We note that these negatives are the major factors behind the company’s weak second-quarter results.
As of Jul 27, 2016 Pilgrim's Pride closed the trading session at $24.32 per share. However, it remains to be seen how the stock performs after posting the lackluster quarterly results.
Stocks to Consider
Some better-ranked stocks in the industry include CBS Corporation (NYSE:CBS) , Vail Resorts Inc. (NYSE:MTN) and Melco Crown Entertainment Limited (NASDAQ:MPEL) . All three companies currently hold a Zacks Rank #2 (Buy).
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