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Surprise jump in chicken prices will help Pilgrim’s: analyst
Story Date: 1/29/2013
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Source: MEATINGPLACE, 1/28/13
Rising chicken prices will aid Pilgrim’s Pride Corp.’s fourth-quarter earnings, and the outlook for record crop plantings bodes well for next year, according to a Wall Street analyst who raised her forecasts for the company.
Breast meat prices rose counter-seasonally in the fourth quarter, surprising the market, due to tight cold storage inventories and solid demand, said Stephens analyst Farha Aslam. Breast meat prices climbed 6.8 percent in the quarter, compared with a year ago, to an average $1.27 per pound. They’ve continued to rise to a current $1.32 per pound.
The outlook for leg quarters is brightening, Aslam said. Leg quarter prices increased 2.3 percent to an average 47 cents per pound in the quarter, on strong demand from Mexico, she said. There is talk that Russia may increase poultry imports because efforts to boost domestic production have fallen short, and optimism that a favorable ruling by the WTO next year could cause China to eliminate its steep anti-dumping duties.
McDonald’s wings?
Wing prices are up 41.1 percent from a year ago, averaging $1.84 per pound in the quarter thanks to continued robust demand and reduced headcount. Aslam said a key to future pricing will be whether McDonald’s expands a test of its Mighty Wings.
Broiler prices averaged a record 97 cents per pound in the quarter, up 8.5 percent over last year, on strong demand from deli customers and moderate production, she said.
Aslam pegged Pilgrim’s feed costs in fiscal 2013 at 28 cents a pound, two cents lower than her previous estimate, reflecting a moderation in soybean meal.
The analyst has an overweight rating on the stock, and raised her price target to $10 from $9. She now expects Pilgrim’s to post an operating loss of 8 cents per share in the fourth quarter ended in December, 10 cents better than her previous forecast. For the full 2012, she forecast operating earnings of 54 cents.
For 2013, Aslam forecast operating earnings of 80 cents per share, up from her earlier projection of 65 cents.
Pilgrim’s is scheduled to report fourth-quarter earnings on Feb. 15.
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