Morningstar

Morningstar, Inc.

Equity Bottom-Up

Even though Pilgrim’s Pride is the second-largest poultry producer in the United States (68% of revenue) and Mexico (12%), with the remainder of sales from Europe following the 2017 deal for Moy Park, we don’t believe it has carved out an edge.Proteins are generally on trend with consumers, but over 80% of Pilgrim’s products are undifferentiated and therefore have difficulty commanding a price premium and higher returns. Several factors outside the firm’s control affect costs (weather, flock…

We expect to take our $29 fair value estimate up at a low-single-digit clip after no-moat Pilgrim’s results, in which the U.S. market sharply recovered, even as Mexico and Europe lagged our forecast. However, after the stock’s 75% run this year, we’d suggest investors await a more significant margin of safety
The U.S. recovery is well underway, with improved chicken demand lifting U.S. revenue 2.3% compared with last year’s 0.2% decline and our fiscal 2019 estimate of 1.5% growth. We expect to…

<p>We see value in no-moat Pilgrim’s shares, as we believe the market fails to appreciate the impact of improved demand for chicken in the U.S. and the transformation of recently acquired assets in Europe, as shares trade around $20, lagging our $29 fair value estimate.</p>

United States

Pilgrim's Pride Corporation produces prepared and fresh chicken products in the United States and Mexico.  Through vertical integration, the Company controls the breeding, hatching, and growing of chickens and the processing, preparation, and packaging of its product lines.  Pilgrim's Pride exports its products to Canada, Eastern Europe, the Far East, and other world markets.

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