Pilgrim's Pride Corp (PPC)

[SAE]

UPDATE: Pilgrim's Pride Earnings Fall, But Beat Expectations

Today : Friday 29 October 2010
Pilgrim's Pride Corp.'s (PPC) third-quarter earnings fell 30% due to the impact from taxes, yet topped analysts' expectations.

Shares surged on the report, climbing as much as 10% in trading Friday as the chicken and prepared foods producer delivered higher-than-expected margins and returns that were driven by cost-cutting from a restructuring.

For the quarter, Pilgrim's Pride reported a profit of $57.9 million, or 27 cents a share, down from $82.7 million, or $1.07 a share, a year earlier. Revenue decreased 0.9% to $1.72 billion. Pressing on the bottom line was the prior year having a $24.8 million income-tax benefit, while the current year had a $30.5 million provision. Gross margin fell to 9.3% from 10%.

Analysts polled by Thomson Reuters most recently forecast earnings of 18 cents a share on revenue of $1.76 billion. Analysts had expected gross margins of 7.9%.

Stephen Share, an analyst with Morgan Joseph & Co., said there are signs the company's cost-cutting efforts are bearing fruit. Pilgrim's Pride emerged from Chapter 11 bankruptcy in December after a 13-month restructuring that left Brazilian beef giant JBS S/A (JBSAY, JBSS3.BR) as a majority holder.

"The top line was ok, but they posted a really good gross margin relative to expectations," he said.

Pilgrim's Pride shares recently traded 48 cents, or 8.4%, higher at $6.19.

Company Chief Executive Don Jackson said the latest results reflect continued sequential improvement in operating efficiencies and cost controls.

The company is optimistic headed into next year despite concerns about rising grain prices and the "uncertain" economy, with food service demand already increasing and expectations for higher beef and pork prices resulting in chicken likely being "attractively positioned with consumers who are looking for the best value."

While chicken demand has been improving from last year's weak levels, U.S. supplies have been ballooning, threatening profits of big poultry companies. Pilgrim's Pride and other major producers also are in the midst of expansion projects as they chase expanding margins and growing export markets, though analysts say cutbacks will be needed to support prices.

Pilgrim's Pride reiterated previously announced expansion plans Friday, including the re-opening of a Georgia plant that will start processing birds in January.

-By Ian Berry, Dow Jones Newswires; 312-750-4072; [e-mail]

(Tess Stynes contributed to this report.)

http://ih.advfn.com/p.php?pid=nmona&article=44996670