Latest news with #PilgrimsPride
Wall Street Journal
2 days ago
- Business
- Wall Street Journal
Some of Trump's Biggest Inaugural Donors Benefit From Early Government Actions
The biggest contributor to President Trump's inauguration was chicken processor Pilgrim's Pride, which gave $5 million. In April, its Brazilian parent company, JBS, received government approval for a U.S. stock listing that it had long sought. The second largest donor was the cryptocurrency company Ripple, which gave about $4.9 million. In May it reached a settlement with the Securities and Exchange Commission to resolve a long-running lawsuit, sending its coin soaring.
Forbes
5 days ago
- Business
- Forbes
These 5 Special Dividends Are More Than Meets The Eye
Young businessman working on laptop at home. Most mainstream financial websites are not 'smart enough' to include special dividends. The yields they display reflect plain ol' quarterly or monthly payouts. For most stocks this does not matter. But for a select few 'special payers' this is a costly oversight. One that we can capitalize on as thoughtful contrarians. In a moment we'll discuss five special dividends. The vanilla screens say they pay as little as 3.2% but in reality they dish up to 13.8%! What exactly is a special dividend payment? It is a one-time cash payout, often the result of a massive cash influx from, say, selling off part of the company or having an unusually profitable year. Usually it is a one-shot deal. But it can be a regular thing. Let's consider chicken producer Pilgrim's Pride (PPC), which recently paid a $6.30 per share special dividend. This is a tremendous 12.7% yield. That's amazing for people who held PPC at the time, but given the company's dividend history, it's likely this is it: PPC Dividend PPC is a classic example of a one-time payer. We are looking for exceptions—the one-time payment that happens every year! These are 'regular' special dividends, sometimes called 'supplemental dividends,' that the company pairs with a regular dividend they know they can afford. Example: ABC Inc. pays 25 cents per share quarterly, but at the end of the year, it pays out 50% of its free cash flow as a supplemental dividend. That dividend still might vary—say, $1 in 2023, $1.50 in 2024, and $1.25 in 2025—but it's extra yield on top of what it can afford to pay on the regular. In some cases, these special dividend payers can be quite generous. Let's take these 3.2%-11.3% yielders that actually pay out 9.0%-13.8% once we include their special distributions: Buckle (BKE)Stated Dividend Yield: 3.2%Actual Dividend Yield (With Specials): 9.0% Buckle (BKE) is a mid- to high-end fashion retailer that's primarily known for its jeans, but it also sells all sorts of apparel, activewear, swimwear and accessories. Fashion stocks have always been fickle, but post-COVID, they've been downright counterintuitive. Numerous 'mall retail' stocks found themselves slowly declining in the years preceding the pandemic, only to find new life despite COVID broadly knocking brick-and-mortar retail on its tail. That includes the Buckle, whose top and bottom lines have dipped from their post-COVID highs but are still far better than what the store delivered for years prior to the pandemic. Looking at its regular dividend over the past decade or so, the difference is hard to notice—a couple of small raises in 2021, but that's it. However, that's because Buckle's dividend has long been unlike its fashion retail brethren. The company prefers to pay a modest regular quarterly dividend, then top it up each year with sometimes spectacular special dividends that boost BKE's yield by double, triple, sometimes even more. Naturally, the rub is that, by virtue of offering massive special dividends, the amount of income we collect from Buckle has the potential to shift enormously from one year to the next—even if the specials have been fairly consistent of late, and even if operational results are largely expected to remain steady over the next couple of years. Even the potential for income volatility isn't great for retirement planners, but for more adventurous investors, it's a secret store of upside that most people will typically overlook. Amerisafe (AMSF)Stated Dividend Yield: 3.3%Actual Dividend Yield (With Specials): 9.7% Amerisafe (AMSF) is a relatively unusual insurer that deals in workers' compensation. The company operates in 27 states and deals in 'high-hazard' industries such as construction, trucking and agriculture. Anyone who wants to invest in an industry with consistent profits should sprint away from the insurance space. AMSF is actually relatively stable compared to, say, P&C insurance, where even good operators may occasionally suffer annual losses. But even then, Amerisafe's bottom line is a moving target. Which makes a regular-and-specials program an extremely responsible way to manage the dividend. AMSF pays a modest (but growing!) quarterly dividend that typically yields around 3%. Then every year, usually in December, it will pay a special dividend with whatever profits it can spare. Like with Buckle, this payout usually doubles or triples the amount of income its shareholders collect in a given year. Again, retirees can't plan their budgets around dividends like Amerisafe's. But consider this: AMSF's 2024 special dividend was the company's lowest in roughly a decade, and it still boosted the stock's total yield to nearly 10%. With that level of dividend, we don't need much positive price action to have a great annual return. I'd keep an eye on that bottom line, though. AMSF's profits, which have already slid for a couple years now, are projected to thin this year and next, too. One area of the market that's rife with 'regular' special dividends is the business development company (BDC) community. These companies share a lot in common with real estate investment trusts (REITs): they were both created by Congress, they both exist to allow regular investors to invest in an otherwise difficult-to-reach asset, and they both are required to pay out at least 90% of their taxable income in the form of dividends. But BDCs invest in dozens if not hundreds of small businesses: not exactly a hotbed of stability and reliability. So in the BDC space, we'll frequently see fairly generous regular dividends complemented with specials that take already good yields and make them downright great. Gladstone Investment Corp. (GAIN)Stated Dividend Yield: 6.4%Actual Dividend Yield (With Specials): 14.3% Gladstone Investment Corp. (GAIN) is part of my favorite Wall Street family: the Gladstones! This group of businesses also includes another publicly traded BDC, Gladstone Capital Corp. (GLAD), as well as a pair of publicly traded REITs: Gladstone Land Corp. (LAND) and Gladstone Commercial Corp. (GOOD). GAIN's target portfolio company will generate $4 million to $15 million in annual EBITDA, have a proven business model, stable cash flows and minimal market or technology risk. As far as BDCs go, GAIN has a narrower portfolio than most, at just 25 companies—mostly manufacturing, business services and consumer services firms, but a few consumer product specialists, too. What sticks out most about Gladstone Investment Corp., however, is its willingness to deal in equity. Most BDCs will typically only have 5% to 10% exposure to equity, but GAIN's target mix is 25% equity/75% debt. This is essential to GAIN's 'buyout' strategy. Gladstone Investment typically provides most (if not all) of the debt capital along with a majority of the equity capital. Its debt investments allow it to pay out a still-high regular dividend, but then it also pays out (extremely variable) supplemental payouts when they realize gains on equity investments. To wit, GAIN's regular monthly dividend accounts for 6% worth of yield, but a 54-cent special dividend to be paid in June and a 70-cent distribution last October work out to an additional 8.3% in yield! That said, Gladstone's specials are all over the place. The company paid three in 2022 and five in 2023, but just one in 2024 and (so far) just one in 2025. Nuveen Churchill Direct Lending Corp. (NCDL)Stated Dividend Yield: 11.3%Actual Dividend Yield (With Specials): 13.8% Nuveen Churchill Direct Lending Corp. (NCDL) is among a handful of other BDCs, such as Goldman Sachs BDC (GSBD) and Carlyle Secured Lending (CGBD), that's connected from a big-name asset manager with a sterling reputation. In this case, NCDL is tied to both fund manager Nuveen, as well as its parent TIAA. The fund's external manager—Churchill, a Nuveen affiliate—invests the BDC in senior secured loans to private equity-owned middle market companies in the U.S. The $2.1 billion portfolio is 210 companies strong right now. The vast majority of holdings (91%) are first lien loans, though Nuveen Churchill Direct Lending also deals in second lien debt, subordinated loans and equity co-investment. This is a relatively young BDC that has only been in existence since 2018, and it just went public in 2024. I wrote plenty about the company in a September column, but here, I want to focus on the payout. Nuveen Churchill Direct Lending has come out of the gate with a regular-and-specials format. The regular quarterly dividend has been set at 45 cents per share, and it has so far paid an additional 10-cent special in every quarter since its IPO. That's a strong double-digit yield base with, at least for now, a meaningful 2.5 percentage points in special sweeteners. The special distributions were declared in connection with the IPO, and April's 10-cent payout was the final dividend in that tranche. Indeed, NCDL's streak might stop this summer—based on its previous activity, any special dividends to be paid in July likely would have been announced in April. If nothing else, investors should keep their eye on NCDL over the next few quarters to see whether these specials were a one-off event or something the BDC will come back to following strong financial results. Also, NCDL is young, so it's difficult to tell where its 'normal' valuation range will lie, but for now, the BDC is trading at an 11% discount to NAV. Barings BDC (BBDC)Stated Dividend Yield: 11.3%Actual Dividend Yield (With Specials): 12.9% Barings BDC (BBDC) is the cheapest of these three BDCs, trading at an 18% discount to NAV right now. The Barings name might not mean much to some readers, but longtime BDC investors will surely remember the name 'Triangle Capital.' That's what the company was known as until August 2018, when the company rebranded following years of writing off bad investments and hacking away at its dividend. But it wasn't just a rebrand—it was a new lease on life. Global financial services firm Barings became an external advisor and overhauled BBDC's portfolio. Today, Barings primarily invests in senior secured private debt investments in 'well-established' middle-market companies across numerous industries. Target companies for its sponsor-backed investments (issuers owned by private equity firms), the largest part of its business at 75%-85% exposure generally, generate between $15 million and $75 million in EBITDA annually. It also has smaller exposure to non-PE-owned businesses, as well as a pair of middle market first lien loan originators, Eclipse Business Capital and Rocade Capital. Meanwhile, about 70% of its investments are first lien loans, though it also has exposure to second lien, mezzanine, equity, structured, and joint venture investments. We've booked gains in BBDC twice through our Dividend Swing Trader service, so I frequently have my eye on this one for short- and long-term opportunities alike. So I was pleased to see when Barings made a splash in Q1. After a few years of dividend growth, the company's quarterly dividend had been stuck at 26 cents per share since mid-2023. However, in February, Barings announced it would pay 5-cent special dividends across the first three quarters of 2025 'based on these strong results, our confidence in our portfolio, and the momentum we have seen so far in 2025.' While I'd prefer growth in the 'stickier' regular dividend, this is a welcome development. The company hasn't made 'top-up' specials since 2014 and 2015. If BBDC makes this a lasting habit, its already stellar dividend will become even tastier. I'll be keeping a close eye on the stock over the next couple of quarters to see if it extends this line of specials into the end of 2025 and into 2026. Brett Owens is Chief Investment Strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: How to Live off Huge Monthly Dividends (up to 8.7%) — Practically Forever. Disclosure: none
Yahoo
7 days ago
- Business
- Yahoo
1 Safe-and-Steady Stock to Keep an Eye On and 2 to Approach with Caution
Stability is great, but low-volatility stocks may struggle to deliver market-beating returns over time as they sometimes underperform during bull markets. Luckily for you, StockStory helps you navigate which companies are truly worth holding. Keeping that in mind, here is one low-volatility stock that could succeed under all market conditions and two that may not keep up. Rolling One-Year Beta: 0.33 Offering everything from pre-marinated to frozen chicken, Pilgrim's Pride (NASDAQ:PPC) produces, processes, and distributes chicken products to retailers and food service customers. Why Is PPC Not Exciting? Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4.5% over the last three years was below our standards for the consumer staples sector Demand is forecasted to shrink as its estimated sales for the next 12 months are flat Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 10.7% that must be offset through higher volumes At $47.90 per share, Pilgrim's Pride trades at 9.9x forward P/E. Check out our free in-depth research report to learn more about why PPC doesn't pass our bar. Rolling One-Year Beta: 0.73 With a profile that was raised due to meme stock mania beginning in 2021, AMC Entertainment (NYSE:AMC) operates movie theaters primarily in the US and Europe. Why Does AMC Fall Short? Products and services have few die-hard fans as sales have declined by 2.7% annually over the last five years Cash burn makes us question whether it can achieve sustainable long-term growth Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders AMC Entertainment's stock price of $3.47 implies a valuation ratio of 2.5x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than AMC. Rolling One-Year Beta: -0.14 Founded in 1980 as a provider for underserved communities in Southern California, Molina Healthcare (NYSE:MOH) provides managed healthcare services primarily to low-income individuals through Medicaid, Medicare, and Marketplace insurance programs across 21 states. Why Are We Fans of MOH? Annual revenue growth of 19.4% over the past five years was outstanding, reflecting market share gains this cycle Economies of scale give it fixed cost leverage when sales grow as well as negotiating power over membership pricing and reimbursement rates Earnings per share have massively outperformed its peers over the last five years, increasing by 14.6% annually Molina Healthcare is trading at $300 per share, or 11.9x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it's free. The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025. While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
21-05-2025
- Business
- Forbes
With Its NYSE Listing Looming, Elizabeth Warren Has Questions For JBS
Senator Elizabeth Warren (D-Mass.) It's been quite a week, and I don't just mean for those of us who are all-in on the second season of The Secret Lives of Mormon Wives. I can't stop thinking about the casts' extremely complicated orders at Utah-based soda chain Swig and what my go-to would be. I think I'd commit to the sparkling water-based fruity refreshers like Mikayla. But this subset of Mormons are not the only ones making food headlines recently. To start off, the JBS saga continues. After my feature published last week on the billionaire Batista brothers and the looming New York Stock Exchange listing of their meat conglomerate JBS, Senator Elizabeth Warren (D-Mass.) sent a letter to the CEOs of JBS USA and Pilgrims' Pride questioning whether Pilgrims' $5 million donation to this year's inauguration was done 'to curry favor with the Trump administration.' The analysts I've spoken with expect a windfall for JBS shareholders, including the Batistas, if the listing goes through. But JPMorgan analysts are now preparing for the opposite. In their latest report, analysts who cover JBS for JPMorgan said they created a hedging strategy to protect shareholders in case shares drop. The final shareholder vote on the listing is this Friday, May 23. I'm no Steve Kornacki, but I'll be watching the results closely. I'm also looking out for the highly anticipated MAHA assessment report on causes of chronic childhood diseases, which is set to be released on Thursday. It is expected to take on pesticides used in farming, which has become a source of Trump Administration in-fighting, according to the Wall Street Journal. Also on the docket are other known factors for disease in children, like diet, lack of exercise and screen time. And for those who are in New York City with me, I'd love to see you to celebrate the documentary The Price of Milk, which is premiering at the Tribeca Film Festival on Sunday, June 8, with an additional screening on Thursday, June 12. I did a few interviews for the film a few years ago, and I'm excited to finally see it all come to life! Ahead of the upcoming holiday weekend, I'm curious, what's on your barbecue lineup? I've enjoyed the image going around online for a fake cookbook aptly titled How To Cook Like The People You Just Deported: Authentic Ethnic Flavors For Bigots Who Don't Deserve Them. There's a lot to reflect on this weekend, and I hope you have a good one. — Chloe Sorvino This is Forbes' Fresh Take newsletter, which every Wednesday brings you the latest on the big ideas changing the future of food. Want to get it in your inbox every week? Sign up here. A dust storm that originated in central Illinois moves through downtown Chicago on the evening of Friday, May 16, 2025. A 2025 Dust Up: I'm coming off my paperback book tour, so I've been sounding the alarms on climate change and extreme weather for months. And when I've mentioned that another Dust Bowl is coming, people sometimes roll their eyes. But the news of recent dust storms in Illinois are just more proof. The images of what the New York Times describes as 'a wall of dust' are foreboding at best. A bicyclist fills a water bottle from a water fountain on May 16, 2025 in Miami, Florida. Dirty Water: The Trump Administration is weakening water pollution laws, and dismantling landmark protections against PFAS, which are the toxic forever chemicals that have been present in public drinking water for decades due to industry deception and government inaction. Even at low levels, PFAS have been linked to cancer, reproductive harm, immune system damage and other serious health problems. The Environmental Working Group describes the move as 'a shocking reversal of one of the most significant public health victories in a generation' that will put millions at risk and let polluters like 3M and Dupont off the hook. EWG cofounder and president Ken Cook said 'This is a betrayal of public health at the highest level. You can't make America healthy while allowing toxic chemicals to flow freely from our taps.' Banners showing images of Donald Trump and Abraham Lincoln hanging off the side of the Department of Agriculture building in Washington, D.C., on May 16, 2025. New Headshots Dropped: While facing criticism for budget cuts to programs, grant funding and staffing as well as threats to relocate out of D.C., USDA headquarters in Washington now has, according to Civil Eats' Food Policy Tracker, a giant banner of President Donald Trump side-by-side with another of former President Abraham Lincoln, who founded the department. The installation marks the USDA's 163rd anniversary. Chloe Sorvino Wild foraged ramps make a mean pesto, and that's all I needed to make this mafalde pasta sing this week. I had to obtain some ramps before the season ended, and after making pesto, I also whipped up a ramp butter and pickled the bulbs. Thanks for reading the 143rd edition of Forbes Fresh Take! Let me know what you think. Subscribe to Forbes Fresh Take here.
Forbes
21-05-2025
- Health
- Forbes
Pilgrim's Pride - No Beef With Growing Profits
free range, healthy brown organic chickens and a white rooster on a green meadow. Selective ... More sharpness. Several chickens out of focus in the background. Atmospheric back light, evening light Demand for chicken has been rising for decades, and it is currently the most consumed protein across the globe. Health benefits and affordability have driven much of the demand, while the beef market has struggled with low cattle stock, rising prices and falling demand. Without a beef operation to drag down profits, this leading chicken producer benefits from the fast-growing market while maintaining profitability and generating cash. Pilgrim's Pride (PPC) is this week's Long Idea. Chicken has steadily gained popularity over the last couple of decades, with the chicken consumption per capita in the U.S. rising from 28 pounds in 1960 to 103 pounds in 2024. Growth in chicken consumption has come largely at the expense of beef consumption, which, per capita, fell from 63 pounds in 1960 to 59 pounds in 2024. As a result, in the U.S., chicken is the most consumed protein. Figure 1: Chicken and Beef Consumption per Capita in the U.S. From 1960 to 2024 Chicken vs. Beef Consumption 1960-2024 Chicken consumption is projected to continue its steady rise across the globe. The global chicken market is forecasted to grow 6% compounded annually from 2024-2033. On a consumption basis, global poultry consumption is projected to rise from 143 million metric tons (MT) in 2025 to 160 million MT in 2033. See Figure 2. Figure 2: Protein Consumption: 2025-2033 Protein Consumption by Type: 2025-2033 The trend in chicken consumption vs. beef consumption highlights the former's 'attractiveness' to consumers, which is driven largely by its relative affordability. According to data from Circana, and provided in Pilgrim's Pride's investor presentation, 87% of home prepared meals contain meat and poultry and the dollar per pound is a top 3 factor in the meat purchasing decision. Over the past two years, the spread between ground beef prices and chicken prices has grown, which only increases the attractiveness of chicken. Over those two years, the dollar per pound of boneless breast chicken and chicken legs, bone in has fallen 4% and 3% respectively, while the cost of ground beef has increased 20%. See Figure 3 for more details. Figure 3: Change in Protein Prices: March 2023 – March 2025 Protein Price Changes The spread between chicken prices and beef prices is likely to continue growing in 2025 too. According to the USDA, cattle inventory contracted for the sixth year in 2024, and the number of cattle on January 1, 2025 represents the lowest level of national herd since 1951. The USDA projects commercial beef production to fall nearly 2% in 2025 while overall protein availability will rise 1.2% YoY. Like chicken, pork consumption is also on the rise, with pork consumption per capita rising slightly from 49 pounds in 2015 to 50 pounds in 2024. The global pork market is forecasted to grow 4% compounded annually from 2025 to 2034. More near-term, the USDA projects commercial pork production to increase 3% YoY in 2025, with strong demand and higher beef prices helping to support overall pork pricing. Pilgrim's Pride is the second largest chicken producer in the U.S., trailing only Tyson Foods (TSN). The company is geographically diversified as it sells its products in the U.S., Mexico, U.K., and Europe. According to the company's most recent investor day presentation, it accounts for: Over the last five years, Pilgrim's Pride's U.S., Mexico, and U.K. and Europe sales grew 7%, 9%, and 17% compounded annually, respectively. Combined, sales across all geographic segments have grown 9% compounded annually from 2019 to 2024. See Figure 4. Figure 4: Pilgrim's Pride's Sales by Region: 2019 – 2024 PPC Sales by Region: 2019-2024 Pilgrim's Pride's largest revenue generating segment is its U.S. operations, which accounted for 59% of 2024 revenue and 68% of 2024 gross profit. The company mainly sells fresh products, which accounted for 90% of U.S. revenue in 2024. But its fresh sales are well diversified with 37% of U.S. fresh sales from small bird products, 33% from cage ready products, 24% from big bird products, and 6% from protein conversion or other products in 2024. See Figure 5. Figure 5: Pilgrim's Pride's Breakdown of U.S. Sales in 2024 PPC Breakdown of US Sales Pilgrim's Pride has capitalized on the growing demand for chicken, and despite not being a flashy high-growth company, has grown its top- and bottom-line for more than two decades. The company has grown revenue by 11% and net operating profit after-tax (NOPAT) by 12% compounded annually since 1998. See Figure 6. The company improved its NOPAT margin from 5% in 1998 to 8% in 2024 while invested capital turns fell from 2.5 to 2.1 over the same time. Rising NOPAT margins are enough to offset falling invested capital turns though, and, drive return on invested capital (ROIC) from 13% in 1998 to 17% in 2024. Additionally, the company's Core Earnings grew 14% compounded annually from $51 million in 1998 to $1.4 billion in 2024. Figure 6: Pilgrim's Pride's Revenue and NOPAT Since 1998 PPC Revenue & NOPAT 1998-2024 More recently, Pilgrim's Pride has grown revenue 9% compounded annually over the past five years while NOPAT has grown 22% compounded annually over the same time. Pilgrim's Pride is not only one of the largest global meat producers, but it is also the most profitable among publicly-traded peers. Pilgrim's Pride has the highest operational (NOPAT margin) and capital (invested capital turns) efficiency, which in turn drives its ROIC to rank highest among publicly-traded peers, which include Tyson Foods (TSN), Smithfield Foods (SFD), and Hormel Foods (HRL) and more meat and food producers. See Figure 7. Figure 7: Pilgrim's Pride's Profitability Vs. Peers: Trailing Twelve Months (TTM) PPC Profitability vs Peers Pilgrim's Pride does not pay regular dividends or repurchase shares. As of December 31, 2024, the most recent share repurchases occurred in 2022. However, the company did announce a special dividend of $6.30/share in March 2025, which was paid out in mid-April 2025. Based on the closing price the day before the dividend was announced, the special dividend provided a yield of 12.5%. While special dividends are, by their very nature, not recurring and 'special', should Pilgrim's Pride provide an additional special dividend, the potential yield to investors could be significant. Since 2018, Pilgrim's Pride has generated a cumulative $1.8 billion in free cash flow (FCF), which equals 13% of its enterprise value. The cumulative FCF is positive despite a large cash burn in 2021 following the disruption caused by COVID in the year prior. Pilgrim's Pride's total debt has fallen from $3.7 billion in 2021 to $3.6 billion in 2024 while its cash and equivalents increased from $428 million to $2.0 billion over the same time. The result, Pilgrim's Pride's adjusted debt net of cash has fallen from $3.7 billion in 2021 to $2.4 billion in 2024. Pilgrim's Pride earns an Attractive overall Credit Rating and scores an Attractive-or-better rating in two of the five credit rating metrics. Even if economic conditions deteriorate or demand fluctuates, the company's strong financial footing secures its operations for the foreseeable future. Figure 8: Pilgrim's Pride's Credit Rating Details PPC Credit Rating Details Prices of primary ingredients (corn, soybean, and wheat) in feeds for chickens and pigs heavily impact Pilgrim's Pride's costs, along with all meat producers. In 2024, corn, soybean, and wheat accounted for 42%, 38%, and 5% of Pilgrim's Pride's feed costs, respectively. For 2025, the USDA forecasts a record corn crop in 2025 and projects average prices for corn, soybean, and wheat to fall in 2025 compared to 2024. In the short-term, this dynamic is a plus for Pilgrim's Pride, as it can spend less on feed and increase margins. However, there is no guarantee that feed prices will remain low. A bad growing season, impacted by weather for example, or another supply chain shock such as 2020, where corn and soybean prices soared, would negatively impact Pilgrim's margins and profits. The good news for potential investors is that Pilgrim's Pride's stock price implies that the company's profits will permanently decline by 40%; so, I think any increase in feed costs is more than priced into the stock. JBS S.A., the world's largest meat producer, currently owns over 82% of Pilgrim's Pride's outstanding common stock. JBS initially acquired its controlling interest in the company after helping it emerge from bankruptcy protection in 2009 with an $800 million investment, which equaled a 64% stake at the time. More recently in August 2021, JBS offered to buy the remaining 20% of Pilgrim's Pride. JBS' offer represented a 22% premium to Pilgrim's Prides trailing 30-day average price. However, Pilgrim's Pride and JBS couldn't reach an agreement and after six months, JBS withdrew its offer in February 2022. Since then, the stock has roughly doubled, and it appears that Pilgrim's Pride's management team made the right choice. Given my outlook on the fundamentals of this business, I do not think another similar offer from JBS is outside of the realm of possibilities for Pilgrim's Pride, in which case investors could be looking at a quick 20%+ gain. Even if no new offer is forthcoming, demonstrated interest from a large inside investors like JBS should instill confidence in PPC investors. At its current price, Pilgrim's Pride's price-to-economic book value (PEBV) ratio is 0.6. This ratio means the market expects the company's NOPAT to permanently decline 40% from 2024 levels. This expectation seems overly pessimistic considering Pilgrim's Pride has grown NOPAT by 12% compounded annually since 1998 and 6% compounded annually since 2014. Below, I use my reverse discounted cash flow (DCF) model to analyze expectations for different stock price scenarios for PPC. In the first scenario, I quantify the expectations baked into the current price. If I assume: the stock is worth $53/share today – equal to the current stock price. In this scenario, Pilgrim's Pride's NOPAT would fall 3% compounded annually from 2025 – 2034. If I instead assume: the stock is worth $64/share today – a 21%+ upside to the current price. In this scenario, Pilgrim's Pride's NOPAT would fall 2% compounded annually through 2034. Should the company's NOPAT grow more in line with historical levels, the stock has even more upside. Figure 9: Pilgrim's Pride's Historical and Implied NOPAT: DCF Valuation Scenarios PPC DCF Implied NOPAT Scenarios Here's a summary of why I think the moat around Pilgrim's Pride's business will enable it to continue to generate higher NOPAT than the current market valuation implies: These days, fewer investors focus on finding quality capital allocators with shareholder-aligned corporate governance. Due to the proliferation of noise traders, the focus is on short-term technical trading trends while more reliable fundamental research is overlooked. Here's a quick summary of what noise traders are missing: Pilgrim's Pride has beaten earnings estimates in 8 of the past 10 quarters, including the latest quarter ended 4Q24. Beating estimates and achieving consistent top- and bottom-line growth could help explain PPC outperforming the overall Consumer Staples sector since the beginning of this year. Year-to-date, PPC is up 13% while the Consumer Staples Select Sector SPDR Fund (XLP) is up just 3%. Additional earnings beats could send shares even higher and further extend the stock's outperformance. Pilgrim's Pride's executives receive both annual incentives and long-term equity awards. The annual incentives are tied to 'PBT margin', which is defined as GAAP income before taxes, excluding certain adjustments, expressed as a percentage of net sales. Long-term equity awards are tied to earnings before interest and tax (EBIT) per processed pound and EBIT margin. I would prefer the company tie executive compensation to ROIC. Doing so ensures that executives' interests are more aligned with shareholders' interests as there is a strong correlation between improving ROIC and increasing shareholder value. Improving ROIC requires attention to all areas of the business, so including it in an executive compensation plan would incentivize executives to improve the entire business, not just one sales goal or earnings number. Despite using PBT margin and EBIT goals in its executive pay, Pilgrim's Pride's management has grown economic earnings, the true cash flows of the business, 4% compounded annually over the last decade, from $646 million in 2014 to $921 million in 2024. Over the past 12 months, insiders have purchased 316,919 shares and sold 176,983 shares for a net effect of 139,936 shares bought. These sales represent <1% of shares outstanding. There are currently 6.8 million shares sold short, which equates to 4% of shares outstanding and just over four days to cover. The following funds receive an Attractive-or-better rating and allocate significantly to PPC:
