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Pilgrims Pride Corp PPC

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Morningstar’s Analysis

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Economic Moat




ESG Risks Should Prove Manageable, Leaving Shares of Pilgrim’s, Tyson, and WH Group Attractive

Analyst Note

| Rebecca Scheuneman, CFA |

The meat processing industry has been a turbulent space, dealing with price-fixing litigation, tariff wars, backlash from environmentalists and animal advocates, links to heart disease and cancer, African swine fever, and threats of obsolescence from plant-based replacements. The pandemic has intensified pressure, with headlines of significant worker illness, and production disruptions that led to product shortages and steep inflation, even as farmers suffered sharp drops in livestock values. With many stocks down significantly year to date, including no-moat Pilgrim's Pride, no-moat Tyson, and narrow-moat WH Group, which are down 50%, 33%, and 18%, respectively, we've assessed whether these declines represent buying opportunities or value traps.

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Company Profile

Business Description

Pilgrim's Pride is the second- largest poultry producer in the U.S. (67% of 2019 sales), the U.K. (21%), and Mexico (12%). The 2019 purchase of Tulip Limited, the U.K.'s largest hog producer, marks the firm's entrance into the pork market, which we expect to represent about 10% of sales. Pilgrim's sells its protein to chain restaurants, food processors, and retail chains, under brand names Pilgrim's, Country Pride, Gold'n Plump, and Just Bare. Channel exposure is split evenly between retail and food service, with the majority of food-service revenue coming from quick-service restaurants. JBS owns 79% of Pilgrim's outstanding shares.

1770 Promontory Circle
Greeley, CO, 80634-9038
T +1 970 506-8000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 29, 2020
Stock Type Slow Growth
Employees 55,400