On Friday, BMO Capital Markets adjusted their outlook on Pilgrim's Pride (NASDAQ: NASDAQ:PPC) shares, increasing the price target to $42 from the previous $38, while maintaining an Outperform rating.
The revision follows Pilgrim's Pride's first-quarter earnings, which outperformed market expectations, driven by robust performance in the Mexico segment and a notable improvement in U.S. chicken margins.
The company reported a first-quarter EBITDA of $372 million, surpassing the consensus forecast of $343 million. This performance was attributed to better results in Mexico and a 200 basis point sequential rise in U.S. chicken margins. Pilgrim's Pride has also maintained a positive outlook for 2024, with signs of strengthening U.S. chicken market fundamentals.
In discussions about future capital allocation, Pilgrim's Pride hinted at the possibility of issuing a special dividend, reflecting a confident stance on financial flexibility and shareholder returns. BMO Capital's analyst highlighted the company's promising margin outlook, especially for U.S. chicken, and anticipates further positive revisions to earnings.
The price target adjustment to $42 is based on these factors, and although BMO Capital has raised its estimates, they indicate a conservative approach in their assessment. The firm's confidence in Pilgrim's Pride is bolstered by the expectation of continued improvement in the company's financial performance.
InvestingPro Insights
Following BMO Capital Markets' optimistic revision of Pilgrim's Pride's price target, InvestingPro data and tips provide additional context for investors considering the company's stock. Pilgrim's Pride boasts a solid market capitalization of $8.52 billion, reflecting its significant presence in the industry. The company's price-to-earnings (P/E) ratio, adjusted for the last twelve months as of Q1 2024, stands at 15.3, offering insight into its valuation relative to its earnings. Notably, Pilgrim's Pride has achieved a commendable year-to-date price total return of 29.97%, underscoring the stock's strong performance so far this year.
Turning to InvestingPro Tips, it's worth noting that Pilgrim's Pride is expected to see net income growth this year. This aligns with the company's positive first-quarter earnings and the upbeat outlook for 2024. Moreover, Pilgrim's Pride is trading near its 52-week high, with the price reaching 98.57% of this peak, which may indicate investor confidence in the stock. However, the company is trading at a high P/E ratio relative to near-term earnings growth and suffers from weak gross profit margins, which could be points of concern for potential investors.
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