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BMO Capital Downgrades Pilgrim’s Pride to ‘Market Perform’

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Jun. 8 2016, Updated 9:10 a.m. ET

Price movement of Pilgrim’s Pride

Pilgrim’s Pride (PPC) has a market cap of $6.3 billion. It fell by 1.8% to close at $24.55 per share on June 6, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.2%, 4.3%, and 24.1%, respectively, on the same day.

This means that PPC is trading 2.6% below its 20-day moving average, 3.7% above its 50-day moving average, and 20.5% above its 200-day moving average.

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Related ETF and peers

The AdvisorShares TrimTabs Float Shrink ETF (TTFS) invests 1.3% of its holdings in Pilgrim’s Pride. This 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 4.6% on June 6, 2016.

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

  • Tyson Foods (TSN) — $22.6 billion
  • Hormel Foods (HRL) — $18.0 billion
  • Industrias Bachoco S.A.B. de CV-ADR (IBA) — $2.4 billion

BMO Capital downgraded Pilgrim’s Pride

BMO Capital has downgraded Pilgrim’s Pride rating to “market perform” from “outperform.” It also reduced the stock price target to $27.00 per share from $29.00 per share.

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Pilgrim’s Pride expansion project

In its June 3, 2016, press release, Pilgrim’s Pride said it has “received state approval for a $24 million expansion project at its Mayfield, Ky., poultry processing complex.”

It plans strategic capital investment of $190 million to enhance key growth customers, reinvest cash flow back into the business, and improve efficiencies to achieve operational excellence in the expansion project.

Performance of Pilgrim’s Pride in fiscal 1Q16

Pilgrim’s Pride (PPC) reported fiscal 1Q16 net sales of $2.0 billion, a decline of 4.4% compared to $2.1 billion 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 $0.24 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. This compares 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. This compares to a current ratio and debt-to-equity ratio of 2.1x and 1.6x, respectively, in fiscal 4Q15.

In the next part, we’ll take a look at Harley-Davidson.

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