Pilgrim's Pride Corporation (NASDAQ:PPC) was downgraded to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Buy) on Jan 16. Going by the Zacks model, stocks carrying a Zacks Rank #4 are likely to perform weaker than the broader market in the next two to three months.
Why the Downside?
Over the last three months, Pilgrim’s Pride’s shares yielded 0.2%, underperforming 8% gain recorded by the industry.
Over the last 60 days, the Zacks Consensus Estimate for the stock has moved south for 2018, reflecting bearish market sentiments.
Pilgrim’s Pride’s near-term revenues and profitability might deteriorate due to headwinds prevalent in the food and meat products industry.
The company offers its services in a highly competitive market. Stiff business rivalry makes buyers’ demand highly elastic and hence exposes the company to risks of market-share loss. In order to increase or retain demand from prospective end users, Pilgrim's Pride stays under constant pressure to lauch innovative products in the market. However, these expenses burden its existing debt burden.
We also notice that Pilgrim’s Pride’s profitability is highly sensitive to the price and availability of certain major inputs such as soybean meal, corn and sorghum. Any sudden supply-demand imbalance or fluctuations in price of these materials might significantly escalate the company’s operational expenses, in turn, hindering its bottom-line performance in the quarters ahead.
Moreover, outbreak of livestock diseases in the meat industry (such as Avian flu) might trouble Pilgrim’s Pride by giving rise to severe logistic disruptions. Notably, such epidemic diseases often compel the government to impose stringent restrictions on the import and export of fresh chicken products, thereby increasing the legal complexities for meat product producers.
Also, Pilgrim's Pride stated that a slew of tropical hurricanes in the United States adversely affected its operations during third-quarter 2017. Occurance of such disasters might give rise to severe logistic disruptions for the company in the days ahead.
Stocks to Consider
Some better-ranked stocks in the same sector are listed below:
Craft Brew Alliance, Inc. (NASDAQ:BREW) currently carries a Zacks Rank of 2 (Buy). The company has pulled off an outstanding average positive earnings surprise of 250.20% in the preceding four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Blue Buffalo Pet Products, Inc. (NASDAQ:BUFF) also carries a Zacks Rank of 2. The company generated an average positive earnings surprise of 3.14% over the last four quarters.
Energizer Holdings, Inc. (NYSE:ENR) has a Zacks Rank of 2. The company recorded an average positive earnings surprise of 24.15% during the same time frame.
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Pilgrim's Pride Corporation (PPC): Free Stock Analysis Report
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