On Thursday, Pilgrim's Pride Corporation (NASDAQ:PPC) experienced a shift in stock rating as CFRA adjusted its stance on the company from Buy to Hold, albeit with an increased price target of $43, up from the previous $41. The new price target is based on a 7.5x EV/EBITDA multiple applied to the adjusted EBITDA forecast for 2025, which is projected at $1,689 million, marking a 2% year-over-year decrease.
The revised estimates by CFRA reflect an uptick in commodity chicken prices influenced by hatchability issues that have constrained chicken supply, coupled with robust consumer demand. Notably, prices for certain chicken products, such as wings, are currently well above historical averages. The expectation is that chicken will maintain its appeal as an economical protein choice relative to beef and pork, especially given the current limited availability of beef, which is seen as advantageous for chicken processors like Pilgrim's Pride.
Despite the positive outlook on commodity prices and demand, CFRA's downgrade comes in the wake of a significant price surge in Pilgrim's Pride shares, which have escalated close to 50% within the current year. The shares are now trading at an EV/EBITDA multiple that aligns with the company's mid-cycle earnings. CFRA anticipates that earnings might reach their zenith in 2024 before entering a normalization phase in 2025, as evidenced by the forecast of a 2% decline in both EPS and adjusted EBITDA for that year.
In other recent news, Pilgrim's Pride Corporation has been making significant strides in the market. The company reported a 4.7% increase in net revenues to $4.4 billion and a 145% surge in adjusted EBITDA to $372 million for the first quarter of 2024. Argus, an analyst firm, has maintained a Buy rating on Pilgrim's Pride due to high chicken demand, and even increased the stock's price target to $50.00. The firm's analysis indicates a robust demand for chicken in both full-service and fast-food restaurants, spurred by beef shortages.
On the other hand, Barclays (LON:BARC) Capital Inc. downgraded Pilgrim's Pride to Equal Weight from Overweight. Yet, the company's earnings per share (EPS) for 2023 have been raised by analysts. In regulatory developments, the U.S. Department of Agriculture (USDA) has proposed a new rule to ensure fairer compensation for contract chicken farmers, including those working with Pilgrim's Pride.
InvestingPro Insights
Pilgrim's Pride Corporation (NASDAQ:PPC) has shown a remarkable performance with a significant price uptick of 46.83% over the last six months, as of the latest data, and is now trading near its 52-week high, at 99.08% of this peak. The company's stock is currently valued at a market capitalization of $9.74 billion, with a P/E ratio of 19.7, reflecting investor confidence.
InvestingPro Tips suggest that while the stock may be in overbought territory, analysts are optimistic about the company's profitability, having revised their earnings upwards for the upcoming period. Additionally, with a positive net income growth expectation for the year and a strong return on assets of 5.18% in the last twelve months as of Q1 2023, the fundamentals appear robust.
For those considering an investment in Pilgrim's Pride, it's worth noting that the company does not pay a dividend to shareholders, which may influence investment strategies focused on income generation. However, the company's liquid assets exceed its short-term obligations, indicating a solid financial position.
For more in-depth analysis and additional InvestingPro Tips on Pilgrim's Pride, visit https://www.investing.com/pro/PPC. There are 11 more tips available that could provide further guidance on your investment decisions. Take advantage of the exclusive offer using coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
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