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Bull of the Day: Pilgrims Pride (PPC)

Pilgrim’s Pride (PPC) is a Zacks Rank #1 (Strong Buy) that engages in the production, processing, marketing and distribution of fresh, frozen, and value-added chicken, and pork products to retailers, distributors, and foodservice operators.

The stock is trading at 52-week highs after a revenue and earnings beat. While PPC is trading up about 15% on the year, it is still down 25% from 2022 highs.

Investors should be looking for more upside if the stock can break the resistance level at $26.50.

More about Pilgrim’s Pride

The company was founded in 1946 and is headquartered in Greeley, Colorado. It employs over 61,000 people and has a market cap of $6 billion.

Pilgrim’s Pride offers its products under the Pilgrim's, Just BARE, Gold'n Pump, Gold Kist, County Pride, Pierce Chicken, Pilgrim's Mexico, County Post, Savoro, To-Ricos, Del Dia, Moy Park, O'Kane, Richmond, Fridge Raiders, and Denny brands.

The company sells its products to chain restaurants, food processors, broad-line distributors, and the retail market.

PPC has a Zacks Style Score of “A” in Value and “B” in Growth. The stock has a Forward PE of 17 and pays no dividend.

Q3 Earnings

In late October, PPC reported a 14% earnings beat on revenues. This the seventh straight earnings beat for the company who has not missed on earnings expectations since late 2021.

Q3 came in at $0.58 v $0.42 expected and revenues were $4.4B v $4.29Be. Adjusted EBITDA margins were 7.4%, which was down from the 10.3% last year.

While the company expected tighter protein supplies into year end, lower grain prices are helping chicken profits. 

Management cited operational excellence efforts and promotional activity as reasons for margin growth. Moreover, PPC saw net sales net sales grow 65% collectively in the Just Bare and Pilgrim’s brands.

Estimates Trend Higher

Looking at earnings estimates, we only have data for the longer-term. However, the move in this data is noticeable.  

For the current year, we see analyst lifting estimates since earnings. For the last 30 days, numbers have been taken from $1.24 to $1.53, an up move of 23%.

Next year the numbers continue to move higher, with estimates going from $2.10 to $2.48, up 18%.

The Technical Take

For the most part, the stock has gone sideways over the last 10 years. While there was an attempted breakout in 2022, that up move failed and the stock sold down to the $20 support level.

While the PPC is up nice this year, the $26.50 level has been a headache for the bulls. A break over that level and we could start to see some serious upwards movement to the $29.50 level. This is the 61.8% Fibonacci retracement, drawn from 2022 highs to recent lows and should be the next area of resistance.

Looking longer term, if the bulls get price over the $30 level, they can start to target those 2022 highs above $34

For those looking for an entry, below are some levels to watch:

21-day Moving Average (MA): $25

50-day MA: $24.35

200-day MA: $23.70

In Summary

Pilgrim’s Pride investors have seen struggles, but nothing like their main competitors in Tyson Foods (TSN). Management's comments seem to point out the difference here is the execution and management.

Bullish inventors can place their bets on the good team over at PPC. But they also can count on solid fundamentals and the technicals offering support.

There should be plenty of meat on the bone for PPC as the year ends and investors can look for a strong start to 2024 if inflation keeps trending lower.

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