What Made Pilgrim’s Pride Stock Rise 11% in 2016?



Stock rose 11%

So far, Pilgrim’s Pride (PPC) stock has grown 11% in 2016. The stock even rose 12% when the company reported its 1Q16 results on April 28. The rise was due to earnings beating estimates. Also, the company announced a special dividend. Management’s optimistic outlook for 2016 impacted the earnings estimate revision. We discussed how this benefitted the stock in the previous part of this series.

As of June 14, 2016, the stock was trading at $24.37—4% growth since its 1Q16 results. The stock was trading 8.5% above its 100-day moving average, 1.8% above its 50-day moving average, and 2.1% below its 20-day moving average. The stock gained as much as 25% at one point in 2016. The stock outperformed the Market, represented by the S&P 500 Index, by 8% as of June 14.

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Special dividend

In continuation of its strategy to improve its capital structure and generate shareholder value, Pilgrim’s Pride announced a special dividend after the earnings release for 1Q16. The company’s board of directors approved a special cash dividend of $2.75 per share. The total amount of the special dividend payment will be ~$700 million—based on the current number of shares outstanding. The special cash dividend was paid on May 18, 2016, to stockholders of record on May 10, 2016. The company paid out $1.5 billion in special dividends in fiscal 2015.

Peers’ stock performance

Regarding stock performance, some of Pilgrim’s Pride’s peers in the industry are also experiencing positive returns. Tyson Foods (TSN) is the largest chicken company in the US. So far, it has grown ~14% in 2016. So far, Sanderson Farms (SAFM) has gained 8% in 2016. Hormel Foods (HRL) has fallen 12%. To get exposure to Tyson, Hormel, and Pilgrim’s Pride you can invest in the First Trust Consumer Staples AlphaDEX Fund (FXG). FXG has ~15% of its holdings in these stocks. Pilgrims’s Pride also holds 2.2% of the PowerShares DWA Consumer Staples Momentum Portfolio (PSL).

In the next part, we’ll look at what Wall Street analysts’ recommendations are for the stock after the revised estimates.


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