Pilgrim's Pride (PPC) Q3 Earnings, Revenues Lag Estimates

Premium consumer goods company, Pilgrim's Pride Corporation (NASDAQ:PPC) reported weak third-quarter 2016 (ended Sep 25, 2016) results. The dismal performance was primarily stemmed by unfavorable exchange rate and grain costs.

The company’s quarterly earnings of 39 cents per share, fell short of the year-ago tally and the Zacks Consensus Estimate by 26.4%.

The company's net income in the third quarter was $98.7 million compared with $137.1 million in the year-ago quarter.

Revenues

In the reported quarter, Pilgrim's Pride generated net revenue of $2,031.7 million, down 3.8% year over year. The top line also missed the Zacks Consensus Estimate of $2,088 million.

Revenues from the company's U.S. operations, which account for nearly 84.9% of the total revenue, fell 4.1% year over year. Revenues from the Mexican business – 15.1% of the total revenue – were down 2.2% year over year.

Costs/Margins

Pilgrim's Pride's cost of sales edged down 0.4% year over year to $1,821.5 million. Gross margin contracted 320 basis points (bps) year over year to 10.3%. Selling, general and administrative expenses decreased 12.4% year over year to $46.1 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) plunged 23.1% year over year to $210.8 million.

Balance Sheet/Cash Flow

Pilgrim's Pride exited the quarter with cash and cash equivalents of approximately $86 million, down from $439.6 million at the end of 2015. Long-term debt (net of current portion) was $1,004.8 million as against $985.5 million as of Dec 27, 2015.

In the quarter under review, the company generated $531.1 million of cash from its operating activities, down 38% year over year. Capital spending totaled $173.4 million, up 33.6% 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 targets to boost sales in the near term on the back of growing demand among consumers for natural food products, such as organic and Antibiotic Free (‘ABF’) Fresh chicken.

Zacks Rank and Key Picks

Pilgrim's Pride currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks within the industry that warrant a look include:

Amplify Snack Brands, Inc. (NYSE:BETR) currently carries a Zacks Rank #2 (Buy) and has an average positive earnings surprise of 9.93% over the four trailing quarters.

Blue Buffalo Pet Products, Inc. (NASDAQ:BUFF) currently carries a Zacks Rank #2 and has an average positive earnings surprise of 13.26% for the trailing four quarters.

ConAgra Foods, Inc. (NYSE:CAG) currently carries a Zacks Rank #2 and has an average positive earnings surprise of 10.66% over the trailing four quarters.

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