Shares in Pilgrim’s Pride jumped to a record high after the chicken giant, fresh from the $1.3bn purchase of UK-based Moy park, unveiled a bigger-than-expected rise in earnings, boosted by “significant” improvement at its previous acquisition.
Pilgrim’s Pride stock touched an all-time high of $32.36 in New York, before easing back to $33.21, a 9.0% gain on the day, and up 75% so far this year.
The gains followed the release of results for the quarter to September 24 showing that group more than doubled earnings to $232.7m, on revenues up 12.0% at $2.79bn.
The earnings were equivalent to $0.93 per share, well ahead of Wall Street expectations of a $0.78-per-share result.
The improvement reflected a “robust” performance in the group’s US operations, while the Mexican division “performed even better than our expectations”, said Bill Lovette, the Pilgrim’s Pride chief executive.
“US domestic demand for chicken was very firm across all bird sizes,” Mr Lovette told investors, noted “quite robust” demand for US exports too.
Furthermore, the integration of GNP Company, the US-based upmarket chicken producer acquired in January, was preceding ahead of expectations, “and we’re already close to delivering the previously stated goal of $30m” in deal synergies, ahead of the scheduled timetable.
Margins at GNP “have improved 600 basis points since the acquisition”, he said,
‘Significant margin improvement’
Mr Lovette added that the experience of the GNP integration, combined with improvements at assets acquired previously in Mexico, meant that “we believe we have the method and the team to continue to growth the profitability of our European business”, Moy Park, which was purchased in September.
“We believe that we can apply our operating methods and just like we’ve done in the US and Mexico, most recently, in GNP and provide significant margin improvement over time,” he said.
He flagged the diversity of the group’s bird sizes, and hence its product range, a factor which “is what fundamentally differentiates us from the competition, giving us the potential to reduce volatility and generate higher margins over time”.
Chicken vs other meats
Mr Lovette acknowledged expectations of an “increase in US production of competing proteins next year”, with US output of beef and pork also rising.
However, growing exports would limit to a “very modest” 1.7% the rise in protein supplies per capita in 2018.
“Despite greater availability of other proteins, the outlook for chicken demand in 2018 remains intact,” he said.