Stock Story -
Chicken producer Pilgrim’s Pride (NASDAQ:PPC) fell short of analysts' expectations in Q2 CY2024, with revenue up 5.8% year on year to $4.56 billion. It made a non-GAAP profit of $1.67 per share, improving from its profit of $0.44 per share in the same quarter last year.
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Pilgrim's Pride (PPC) Q2 CY2024 Highlights:
- Revenue: $4.56 billion vs analyst estimates of $4.62 billion (1.4% miss)
- EPS (non-GAAP): $1.67 vs analyst estimates of $1.30 (28.7% beat)
- Gross Margin (GAAP): 15.2%, up from 6.5% in the same quarter last year
- Free Cash Flow was -$213.2 million, down from $162.6 million in the previous quarter
- Market Capitalization: $9.82 billion
Offering everything from pre-marinated to frozen chicken, Pilgrim’s Pride (NASDAQ:PPC) produces, processes, and distributes chicken products to retailers and food service customers.
Perishable FoodThe perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.
Sales GrowthPilgrim's Pride is one of the largest consumer staples companies and benefits from a strong brand, giving it customer trust and leverage in many purchasing and distribution negotiations.
As you can see below, the company's annualized revenue growth rate of 10.8% over the last three years was decent for a consumer staples business.
This quarter, Pilgrim's Pride's revenue grew 5.8% year on year to $4.56 billion, missing Wall Street's estimates.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Pilgrim's Pride broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.
Taking a step back, an encouraging sign is that Pilgrim's Pride's margin expanded by 3 percentage points during that time. We have no doubt shareholders would like to continue seeing its cash conversion rise as it gives the company more optionality.
Pilgrim's Pride burned through $213.2 million of cash in Q2, equivalent to a negative 4.7% margin. The company's quarterly cash flow turned negative after being positive in the same quarter last year. This warrants extra attention because consumer staples companies typically produce more consistent and defensive performance.
Key Takeaways from Pilgrim's Pride's Q2 Results We were impressed by how significantly Pilgrim's Pride blew past analysts' gross margin expectations this quarter. We were also excited its EPS outperformed Wall Street's estimates. On the other hand, its revenue unfortunately missed analysts' expectations. Overall, we think this was a solid quarter. The stock traded up 1.9% to $42.02 immediately after reporting.
