Chicken and pork products producer Pilgrims Pride (NASDAQ:PPC) stock collapsed on its Q4 2021 earnings results providing cheaper entry levels for investors. The Company is seeing unprecedented cost inflation, supply chain disruptions, and labor shortages in Europe and the U.S. However, labor shortages are starting to ease up. The Company has seen a continued recovery in its foodservice business as commercial, and consumer demand continues to strengthen despite higher prices.
The Company has been able to negotiate new price models with key customers to help mitigate the rising costs. The rising interest rates should help dampen costs in 2022 while new pricing models can maintain or grow margins. The Company was an epicenter stock during the pandemic but the recovery in demand should continue to improve as the reopening marches forward. Prudent investors seeking exposure in the poultry food segment can watch for opportunistic pullbacks in shares of Pilgrim’s Pride.
Q4 Fiscal 2021 Earnings Release
On Feb. 9, 2022, Pilgrim’s Pride reported its fiscal Q4 2021 earnings for the quarter ended in December 2021. The Company reported earnings-per-share (EPS) profits of $0.56, beating away consensus analyst estimates for $0.53, by $0.03. GAAP net income was $36.8 million. Revenues grew 29.5% year-over-year (YoY) to $4.04 billion versus $3.81 billion analyst estimates. Adjusted EBITDA rose 64% YoY to $1.3 billion or an 8.7% margin for the quarter. Full-year 2021 revenues rose 22% YoY to $14.8 billion with $31 million with GAAP net income of $31 million.
Prepared foods continued to improve as Pilgrim’s and Just Bare brands saw significant growth in both retail and e-commerce channels. Mexico was solid in 2021. Its European business was impacted by inflation, labor shortages, and pig pricing. The Company ended the year with strong liquidity with an adjusted EBITDA to net leverage ration of less than 2.2X.
Conference Call Takeaways
Pilgrim’s Pride CEO Fabio Sandri covered the general market conditions in the U.S. chicken market. Productions rose despite poor hatchability rates as the USA outlook for 2022 indicates a 1.6% increase in annual supply. He noted that the industry is holding its flock longer in an effort to produce more eggs. As the industry holds hens longer to sell more eggs, the hatchability performs declines as hens age. Overall, the domestic consumer demand was very strong as food service continued to see YoY improvements driven by a recovery in commercial and noncommercial segments. Annual food service demand rose 4% higher than 2019 pre-pandemic levels. He stated,
“The retail channel while demanding less volume when compared to the pantry loading during 2020, continues to exceed demand levels experienced in 2019. Demand for fresh chicken in 2021 declined versus the prior year, however, was up 4% versus 2019, while retail daily posted positive year-over-year improvement. Combined, the net increase in demand pressured cold storage stocks, which remain 14% below December 2020 levels.
As a result of sustained strong demand, which we estimated to be above pre-COVID baselines coupled with only mild supply growth, prices for commodity chicken should remain sustained as demonstrated by the jumbo cutout, which is priced at 71% above the five-year average during the fourth quarter. Even with the increase in prices, we see chicken be the most affordable and most available meat protein option as the aggregate production of all other meat proteins is anticipated to be down year-over-year in 2022.”
He noted that pricing didn’t keep pace with inputs, but the Company was able to renegotiate new pricing models with key customers to mitigate inflationary pressures.
PPC Stock Trajectories
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for PPC stock. The weekly rifle chart peaked near the $29.68 Fibonacci (fib) level. The weekly inverse pup triggered the earnings collapse through the 50-period moving average (M.A.) at $25.99 and lower Bollinger Bands (B.B.s) at $24.44 with a falling 5-period MA at 26.40. The weekly stochastic is chopping at the 30-band attempting to coil up again.
The weekly 200-period M.A. support sits at $22.95. The daily rifle chart has a downtrend with a falling 5-period M.A. at $24.93 and lower B.B.s at $23.07 as the stochastic falls to the 20-band. The daily 200-period M.A. sits at $26.34. The daily market structure low (MSL) buy signal triggered above $21.15 which is a key support area to watch. Prudent investors can watch for opportunistic pullbacks at the $23.48 fib, $22.51 fib, $21.93 fib, $21.15 fib, $20.16 fib, $19.47 fib, and the $18.31 fib level. Upside trajectories range from the $26.41 fib up towards the $32.07 fib level.