Pilgrim’s Pride Corporation (PPC – Free Report) reported dismal first-quarter 2019 results, with the top and the bottom line declining year over year. Also, the figures missed their respective Zacks Consensus Estimate. In fact, this marked the company’s fifth straight quarter of earnings miss. Results were affected by a tough chicken market in Mexico and high feed costs in Europe. Nevertheless, improved market conditions in the United States were an upside. Let’s take a closer look
Q1 in Details
Quarterly adjusted earnings came in at 35 cents per share, which lagged the Zacks Consensus Estimate of 37 cents. Also, the bottom line plunged nearly 34% from 53 cents in the year-ago quarter. The downside was caused by lower revenues and gross profit as well as dismal operating margin.
In the reported quarter, Pilgrim’s Pride generated net sales of $2,724.7 million, down 0.8% year over year. Also, the top line missed the Zacks Consensus Estimate of $2,748 million. Results were hurt by lower sales in Europe and Mexico regions.
Revenues from U.S. operations came in at nearly $1,883.6 million, up 2.3% year over year. The upside was driven by strong markets and brands. Moreover, commodity market for large bird deboning, particularly for chicken, witnessed improved trends. Improved commodity boneless prices were also an upside.
Mexican operations generated revenues of $326.1 million in the reported quarter, down 9.7% year over year. Weak seasonal trends were a drag on the region’s performance. Moreover, lower demand for chicken due to higher availability of imported pork was a drag. Nevertheless, the region gained from growth in the Prepared Foods category.
Also, revenues from European operations declined almost 5.4% year over year to $515 million. The region was persistently affected by higher input costs stemming from feed, utilities, labor and packaging. These were partially offset by cost-reduction efforts, price adjustments and other synergies.
The company’s overall cost of sales in the reported quarter inched up 1.9% year over year to $2,505.7 million. Lower sales and increased cost of sales caused gross profit to slump 23.9% to $218.9 million. Also, gross margin fell 2.5 percentage points to 8%.
Further, adjusted EBITDA came in at $204.4 million, down 24.8% year over year. Adjusted EBITDA margin of 7.5% in the reported quarter fell 2.4 percentage points.
Other Financial Details
Pilgrim’s Pride exited the quarter with cash and cash equivalents of approximately $378.5 million, long-term debt (net of current portion) of $2,303.7 million and total shareholders’ equity of $2,144.5 million. Further, the company generated $120.4 million as cash from operating activities.
Growth Efforts on Track
This Zacks Rank #3 (Hold) expects conditions in Mexico to improve gradually. In fact, it is already witnessing better chicken demand within the region in the second quarter. In the European region, the company is on track with cost-reduction efforts. This combined with suitable pricing model are expected to yield results in the forthcoming periods.
Pilgrim’s Pride’s shares rallied 33.1% in the past three months compared with the industry’s rise of 11.2%.
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