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Pilgrim's Pride Beats Forecasts, Sees Strong 2005

By Reuters
Published | Updated

CHICAGO – Pilgrim's Pride Corp. (PPC), the No. 2 U.S. poultry producer, Monday said quarterly earnings nearly tripled due to an acquisition and also forecast stronger-than-expected 2005 profit, sending shares up 20 percent.

The Pittsburg, Texas-based company said it expects strong growth thanks to lower feed costs and the smooth integration of the former ConAgra Foods Inc. (CAG) chicken division, acquired last year.

During the fiscal fourth quarter ended Oct. 2, Pilgrim's Pride profit rose to $72.3 million, or $1.09 per share, from $25.1 million, or 61 cents per share, a year ago.

Excluding a gain due to an insurance payment for a 2002 meat recall and a restructuring charge earnings would have been $62.6 million, or 95 cents a share. Wall Street analysts on average expected 82 cents, according to Reuters Estimates.

"It was definitely a good quarter," said Todd Duvick, research analyst with Banc of America. "Strong demand for chicken, very strong prices, and better prices on the feed side. It is definitely going to help them."

Feed is a major cost to chicken producers and prices for feed grain, particularly corn, have tumbled in reaction to an expected record large U.S. corn harvest.

The company projected 2005 earnings of $2.60 to $2.90 per share, compared with $2.00 this year. Wall Street on average had expected $2.41 in 2005, according to Reuters Estimates.

Pilgrim's became the nation's second-largest poultry producer when it bought the ConAgra poultry unit last November for $300.8 million in cash and 25.4 million in shares of common stock.

"Our U.S. chicken business continues to show signs of strength and the rapid realization of the synergies in connection with the ConAgra acquisition has allowed our financial performance to be stronger than we previously projected," Rick Cogdill, Pilgrim's chief financial officer, told analysts on a conference call.

Revenue for the 2004 fourth quarter rose to $1.49 billion from $709.47 million a year ago.

During the call with analysts, the company also estimated fiscal first-quarter 2005 earnings of 50 to 60 cents per share, compared with 20 cents a year earlier. The 2004 first fiscal quarter, which ended in January, did not fully reflect the ConAgra purchase.

Fiscal 2005 should feature "favorable consumer trends, rising export demand, and projections for a further drop in commodity grain prices," Pilgrim's President and Chief Executive O.B. Goolsby said in the earnings report.

Last year's fourth-quarter results were affected by one-time items that increased results by 56 cents per share. Excluding those, year-earlier earnings would have been 5 cents per share.

Pilgrim's Pride shares were up $5.42, or 19 percent, at $34.25 on the New York Stock Exchange (search) Monday. The stock earlier in the session reached $34.65, the highest level in a year.