Poultry products producer Pilgrim’s Pride (NYSE: PPC)
stock took a hard hit from the 2020 pandemic
as shares have yet to recover to pre-COVID levels. However, the COVID-19 vaccine rollouts
and loosening of restrictions are helping the Company regain footing on its way to recovery. Shares are outperforming the benchmark S&P 500 index (NYSEARCA: SPY)
in 2021, almost triple the index performance. Yet, shares are still relatively cheap compared to the performance of the poultry group which include Tyson Foods (NYSE: TSN)
and Sanderson Farms (NASDAQ: SAFM)
. A number of tailwinds in 2021 in addition to economic recovery, rising chicken prices, the chicken sandwich wars, and a resumption of in-restaurant dining can help push shares higher. Prudent investors seeking undervalued stocks that can benefit from the recovery can monitor shares of Pilgrim’s Pride for opportunistic pullback levels to consider building a position.
Q4 2020 Earnings Release
On Feb. 11, 2021, Pilgrim’s Pride reported its Q4 2020 earnings for the quarter ended December 2020. The Company reported an earnings-per-share (EPS) profit of $0.25, excluding non-recurring items missing consensus analyst estimates for a profit of $0.35, by a (-$0.10). Revenues beat consensus estimates coming in at $3.12 billion versus $3.11 billion, rising 1.8% year-over-year (YoY). Net GAAP income for Q4 was $0.1 million and adjusted EBITDA was $205.4 million, a 6.06% margin, up 27% YoY. The Company noted a robust recovery in its Mexican operations, rebounding strongly to finish in-line with prior years. The Company appointed Matthew Galvanoni as CFO, effective March 15, 2021. Galvanoni was VP of Finance at Ingredion since 2016.
Conference Call Takeaways
Pilgrim’s Pride CEO, Fabio Sandri detailed, “For the year, in US, our retail and QSR (quick service restaurants) business performed extremely well due to strong demand across our customer base. Operationally, our commodity large big bird deboning also continued to improve despite tough market conditions.” This was largely affected by the chicken sandwich wars as fast food brands quickly armed themselves with new-fangled chicken sandwich rollouts after the success of Popeye’s chicken sandwich. Online volume for Just BARE brand case-ready grew 230% in 2020 and gaining more brick and mortar retail distribution for the brand. The Company is doubling case-ready capacity in the Cold Springs, MN plant and raising production of Just BARE brand by 20%. The US Prepared Food business revenues fell (-22%) on 29% less volume YoY. Most of this was from pandemic-related school closings. The Company raised margins by 36% by better optimizing the mix in food service and retail channels and improved buying costs by 5% by simplifying the retail and foodservice portfolio. China continues a large importer of U.S. dark meat and paws and the rest of the world demand has offset pullbacks from China “beyond our near-term expectations, primarily due to very robust demand from other developing countries.”
The chicken sandwich wars should continue into 2021. Most importantly, the return to normal will hinge on vaccinations. CEO Sandri specifically noted, “Outside of QSR, demand from industrial foodservice customers was stable, but still below last year, and we do not expect volumes to return closer to prior levels until the population is more widely vaccinated.” This is where the vaccine acceleration will be instrumental in 2021 especially with schools reopening by 2H 2021.
PPC Price Trajectories
Using the rifle charts on monthly and time frames provides a broader view of the landscape for PPC stock. The monthly rifle chart is trying to form a breakout with the rising 5-period moving average (MA) near the $19.50 Fibonacci (fib) level. It still needs to cross through the 15-period MA at $20.07, which can occur on the monthly candle close especially with the powerful monthly stochastic forming a bullish mini pup through the oversold 20-band. The monthly market structure low (MSL) buy triggered above $17.23. On the flipside, the monthly market structure high (MSH) sell triggered under $27.67, making it a key price resistance as bears will try to defend their shorts there. The weekly rifle chart formed a pup breakout with a rising 5-period MA at $21.03 and rising 15-period MA at $20.02. The weekly stochastic cross up trigger the pup but is now forming a mini pup through the 80-band making it an even powerful uptrend targeting the upper Bollinger Bands (BBs) at $23.97. Prudent investors can watch for opportunistic pullback levels at the $21.05 fib, $20.68 fib, $19.70 fib, $18.85 fib, and the $18.31 fib. The deep bargain level would be at the $17.23 monthly MSL trigger/fib area if it gets there. Upside trajectories range from the $31.15 fib to the $33.52 pre-COVID levels/fib and the $37.95 fib.
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