Pilgrim’s Pride shares soared after the poultry producer unveiled a bigger-than-expected rise in earnings, lifted by higher US chicken price, but also by the knock-on effects of tariffs on Mexican imports.
Shares in the Colorado-based breeder and processor soared 8.1% in early deals, before easing back to $28.03, up 3.6% on the day.
The jump followed the release by the group of earnings up 60% at $170.1m for the April-to-June quarter, on revenues flat at $2.84bn.
The earnings were equivalent to $0.68 per share, above the $0.61-per-share result expected by Wall Street.
Strong home growth
Pilgrims Pride reported particularly strong growth in the home US market, where it generates about two-thirds of takings, and operating profits rose by 88% to $187.0m.
While the group is raising its focus on higher-margin, value-added products, the improved performance also reflected a “much better environment in the US” than a year before, “particularly in commodity large bird deboning”.
Pricing at retailers and takeaway stores also “returned to seasonal level”.
The “large-bird cutout”, or wholesale price, “tracked much closer to the five-year average, driven by strengths in wings, leg quarters, and tenders”.
It reported the cutout at 73.86 cents a pound, well above year-ago levels which fell below 60 cents a pound in August last year.
Strong US chicken exports
Values have been supported by strong US chicken exports, which the US Department of Agriculture reported for May up more than 13% year on year at 623m pounds, reflecting in part a quest for protein to fill voids left by African swine fever (ASF) in pork production, notably in parts of Asia.
US chicken shipments to Vietnam, amidst a marked ASF outbreak, soared 70% in May.
Firm demand has also been reflected in weakened supplies of US chicken inventories, with the amount of chicken in cold storage in June down 5.8% year on year at 836.2m pounds.
Mexican profits boosted
Meanwhile, in Mexico, the group achieved 10.3% growth to $68.4m in operating profits.
“A return to much more normal growing conditions together withstrong demand drove a very positive price reaction throughout the quarter,” said Jayson Penn, the Pilgrim’s Pride chief executive.
“The availability of imported pork from the US has also significantly diminished, and presented much less competition to demand for chicken.”
US pork exports to Mexico in May were, at 52,555 tonnes, down 26% year on year, reflecting retaliatory tariffs imposed after the US slapped duties on Mexican steel and aluminium.
However, in late May the 20% retaliatory duty on most US pork entering Mexico was removed as the two countries, and Canada, reached an agreement on steel and aluminium tariffs.