Here’s Why We Believe Pilgrim’s Pride Corp Is Worth $24 Per Share

by Trefis Team
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Pilgrim’s Pride Corp (NASDAQ: PPC) is a leader in the production, processing, marketing, and distribution of fresh, frozen, and value-added chicken products to retailers, distributors, and foodservice operators. During the previous annual earnings the company’s revenue grew by 9% at 10.8 Billion y-o-y for the full year, over 2016’s $8.8 Billion, gained from upside witnessed in the U.S., Mexico, and European segments. The major factors that drove the top line were the 11.6% growth in the U.S. Segment and were backed by the company’s investments, acquisitions, operational improvements, as well as continued stellar performance of case-ready and the small bird businesses. These upsides were slightly countered by volatility in the feed and commodity chicken segment. Their Mexico segment saw increased volumes and strong demand for chicken and the European segment benefited from successful integration of acquired operations as well as a focus on key customers.

Driven by strong growth from its Mexican operations, we anticipate the company will post progressive results in future. Our price estimate of $24 is dependent on a FY18 sales forecast of $ 11.1 bn, up 3.3% from $10.8 bn last fiscal. We also expect  net income margin to be ~5.4 %.  We expect a Price-to-Earnings multiple of 10 and an average share count of 249 Mn giving a share price estimate of $24, roughly 25% above its current market price.

 
Our revenue estimate of $ 11.1 bn for FY2018 is arrived at by projecting revenues for all its three segments of the Company: U.S,  U.K. & Europe, and Mexico Segment, which  represents the total net sales, and following historical growth trends and the percentage contribution of each segment to total to the company’s top line.

The P/E multiple is also forecast taking into account the historical data and its likely trend. Detailed steps to arrive at our price estimate are outlined in our interactive dashboard Is the Market Pricing Pilgrim’s Pride Corp FairlyYou can modify our assumptions to arrive at your own price estimate for the company.

 

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