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Why Did Pilgrim’s Pride Fall ~6% on May 6?

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Price movement of Pilgrim’s Pride

Pilgrim’s Pride (PPC) has a market cap of $6.2 billion. It fell by 5.9% to close at $24.76 per share on May 6, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -8.0%, -4.4%, and 12.1%, respectively, on May 6. This means that PPC is trading 2.0% below its 20-day moving average, 0.67% below its 50-day moving average, and 12.0% above its 200-day moving average.

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Related ETF and peers

The AdvisorShares TrimTabs Float Shrink (TTFS) invests 1.3% of its holdings in Pilgrim’s Pride. The ETF aims to outperform broad US equities. The actively managed, equal-weighted fund selects stocks based on trends in outstanding shares, firm leverage, and free cash flow. The YTD price movement of TTFS was 1.5% on May 6, 2016.

The Schwab US Mid-Cap ETF (SCHM) invests 0.07% of its holdings in Pilgrim’s Pride. The ETF tracks a market-cap-weighted index of mid-cap stocks in the Dow Jones US Total Stock Market Index.

The market caps of Pilgrim’s Pride competitors are as follows:

  • Hormel Foods (HRL) — $20.5 billion
  • Industrias Bachoco S.A.B. de CV-ADR (IBA) — $2.4 billion
  • Sanderson Farms (SAFM) — $2.1 billion

Pilgrim’s Pride recalled more chicken products

Pilgrim’s Pride has expanded its 5 million pound recall of cooked chicken products contaminated with foreign materials. This is the second expansion of the recall that started in April 2015 after complaints regarding plastic contamination of chicken nuggets from customers. These products include boxes and bags of green dragon and Sweet Georgia brand fully cooked chicken products.

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Performance of Pilgrim’s Pride in fiscal 1Q16

Pilgrim’s Pride reported fiscal 1Q16 net sales of $1,962.9 million, a fall of 4.4% compared to net sales of $2,052.9 million in fiscal 1Q15. The company’s cost of sales as a percentage of net sales rose by 7.7%, and its operating income fell by 42.4% in fiscal 1Q16 compared to fiscal 1Q15. It reported foreign currency transactions of $0.235 million in fiscal 1Q16 compared to -$9.0 million in fiscal 1Q15.

Its net income and EPS (earnings per share) fell to $118.4 million and $0.46, respectively, in fiscal 1Q16, compared to $204.2 million and $0.79, respectively, in fiscal 1Q15.

Pilgrim’s Pride’s cash and cash equivalents rose by 30.8%, and its inventories fell by 2.9% in fiscal 1Q16 compared to fiscal 4Q15. Its current ratio rose to 2.3x and its debt-to-equity ratio fell to 1.5x in fiscal 1Q16, compared to a current ratio and a debt-to-equity ratio of 2.1x and 1.6x, respectively, in fiscal 4Q15.

The company has declared a special cash dividend of $2.75 per share to improve its capital structure and generating shareholder value. The total value of special dividends will be ~$700 million, based on current shares outstanding. The special cash dividend will be paid on May 18, 2016, to shareholders of record at the close of business on May 10, 2016.

In the next article, we’ll discuss Vista Outdoor (VSTO).

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