Pilgrim's Pride (PPC) Beats On Q3 Earnings, Revenues Up Y/Y

Pilgrim's Pride Corporation (NASDAQ:PPC) reported strong third-quarter 2019 results, with the bottom line beating the Zacks Consensus Estimate. Moreover, earnings and revenues improved year over year. The quarterly results were backed by improved results in the United States and Mexico. Let’s take a closer look

Q3 in Detail

Quarterly adjusted earnings of 45 cents per share improved substantially from adjusted earnings of 21 cents reported in the year-ago quarter. Further, the bottom line surpassed the Zacks Consensus Estimate of 43 cents. Improved sales and margins supported bottom-line results.

In the reported quarter, Pilgrim's Pride generated net sales of $2,778 million, up 3% year over year. Results were backed by higher sales in the United States and Mexico.

Revenues from the U.S. operations amounted to $1,931.7 million, up 3.6% year over year. The upside was driven by strong U.S portfolio gains, backed by its differentiated strategy. Results also benefited year over year from significant growth in the U.S. pure commodity market. Further, the demand for the non-commodity segment remained strong. Additionally, the company’s progress on its Key Customer Strategy is aiding growth.

Mexican operations generated revenues of $328.8 million in the reported quarter, up 7.2% year over year. Results gained from growth in the Prepared Foods category and branded products. Prepared Foods rose in double digits, driven by robust performance of premium Pilgrim’s and Del Dia brands.

Revenues from European operations declined 1.7% year over year to $517.5 million as it continued to witness higher input costs in the region. However, the third-quarter results for the segment marked an improvement from the prior quarter’s decline of 4.8%. The improvement was driven by the company’s efforts to mitigate the input-cost challenges by better integration of these costs in the customer pricing models. Robust operational efficiencies further aided the performance.

Overall cost of sales of Pilgrim's Pride in the reported quarter declined 1.3% year over year to $2,495.8 million. Moreover, higher sales and lower cost of sales drove gross profit, which rose 66.3% year over year to $282.2 million. Also, gross margin rose 3.9 percentage points to 10.2%.

Further, adjusted EBITDA was $258.4 million, up 65.6% year over year. Adjusted EBITDA margin of 12.3% in the reported quarter reflected rise of 3.51 percentage points.

Other Financial Details

Pilgrim's Pride exited the quarter with cash and cash equivalents of approximately $338.4 million, long-term debt (less current maturities) of $2,279.9 million, and total shareholders’ equity of $2,330.1 million. Further, the company generated $535.5 million as cash from operating activities in the first nine months of 2019.

Growth Efforts on Track

The Zacks Rank #2 (Buy) company is committed toward boosting operations in the United States through its Key Customer strategy as well as augmenting capacities and capabilities. In the Mexico region, it continues to engage in evolving the portfolio with product diversification, high-value products and margin expansion. Also, in the European region, management is adhering to operational improvements, pricing adjustments and Key Customer strategy to mitigate the adversities, stemming from higher input costs. Further, the company recently acquired Tulip Ltd, which is likely to strengthen its position in the U.K. market.

Price Performance

Pilgrim's Pride’s shares have rallied 90% year to date compared with the industry’s growth of 27.3%.

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