Strong consumer demand continues to support companies in the Zacks Food – Meat Products industry, with protein remaining a staple in diets and shoppers increasingly gravitating toward leaner cuts, premium offerings and cleaner-label options. Innovation is also helping leading players stay relevant, as companies introduce convenient, value-added formats and expand into specialty and hybrid protein products that align with evolving health and lifestyle trends.However, the industry still faces headwinds from t ...

Market Overview - Broader equity markets experienced a four-day winning streak as the likelihood of a Federal Reserve rate cut increased to approximately 89%, up from 67% a month ago [1] - The surge in the 10-year Treasury yield raised skepticism, impacting the short-term market rally following the release of key economic data [1] Economic Indicators - The core personal consumption expenditures price index for September showed an annual increase of 2.8%, slightly below the expected 2.9% [2] - U.S. consumer sentiment improved in December, with the Consumer Sentiment Index rising to 53.3 from 51 in November [2] Investment Strategy - Investors are advised to focus on "cash cow" stocks with high returns, emphasizing the importance of attractive efficiency ratios like return on equity (ROE) [2] - High ROE indicates effective reinvestment of cash at a high rate of return, helping to identify financially healthy companies [3][4] Screening Parameters - Stocks were shortlisted based on criteria including cash flow greater than $1 billion and ROE exceeding industry averages [5] - Additional metrics included price/cash flow lower than industry averages and return on assets (ROA) greater than industry averages [6] Stock Picks - Selected stocks with high ROE and strong cash flow include TE Connectivity (TEL), ZTO Express (ZTO), Pilgrim's Pride Corporation (PPC), Assurant, Inc. (AIZ), and Host Hotels & Resorts, Inc. (HST) [7] - These stocks also exhibit solid earnings surprises, strong growth outlooks, and favorable valuation metrics [7] Company Profiles - **TE Connectivity**: A global technology company focused on connectivity and sensor solutions across various industries, with a long-term earnings growth expectation of 12.3% and a trailing four-quarter earnings surprise of 6.5% [8][9] - **ZTO Express**: A leading express delivery service in China with a long-term earnings growth expectation of 1.7% and a Zacks Rank of 1 [10][11] - **Pilgrim's Pride**: Engaged in the production and distribution of chicken products, with a trailing four-quarter earnings surprise of 10.4% and a Zacks Rank of 2 [11][12] - **Assurant**: Provides risk management solutions in housing and lifestyle markets, with a trailing four-quarter earnings surprise of 22.7% and a Zacks Rank of 2 [12][13] - **Host Hotels**: A leading lodging REIT focused on luxury and upper-upscale hotels, with a trailing four-quarter earnings surprise of 11% and a Zacks Rank of 2 [14][15]

Core Viewpoint - Pilgrim's Pride Corporation reported mixed results in its Q3 2025 earnings, with revenue growth but a decline in earnings per share, leading to questions about future performance [3][4]. Financial Performance - Adjusted earnings per share for Q3 were $1.52, down from $1.63 in the previous year, but exceeded the Zacks Consensus Estimate of $1.41 [4]. - Net sales increased by 3.8% year over year to $4,759.3 million, driven by favorable commodity pricing and growth in various regions [4]. - Gross profit decreased to $659.4 million from $684 million last year, with operating income at $492.6 million and adjusted EBITDA at $633.1 million, reflecting a margin of 13.3% compared to 14.4% in the prior year [5]. Segment Analysis - U.S. Operations: Revenue rose 2.3% to $2,836.6 million, with an adjusted EBITDA margin of 16.9%, down from 18% [6]. - Europe Operations: Net sales increased by 6.5% to $1,392.5 million, with an adjusted EBITDA margin of 7.9%, down from 8.6% [6]. - Mexico Operations: Revenue grew by 5.3% to $530.2 million, with an adjusted EBITDA margin of 8.2%, down from 9.7% due to production challenges [7]. Financial Health - The company ended the quarter with cash and cash equivalents of $612.6 million, long-term debt of $3,091.7 million, and total shareholders' equity of $3,555.7 million [8]. - Cash from operating activities for the nine months ended September 28, 2025, was $1,080.4 million [8]. Analyst Sentiment - There have been no earnings estimate revisions from analysts in the past two months, indicating a period of stability in expectations [9]. Investment Scores - Pilgrim's Pride holds a strong Growth Score of A, a Momentum Score of B, and a Value Score of A, placing it in the top 20% for the value investment strategy [10][11]. Outlook - The company has a Zacks Rank of 3 (Hold), suggesting an expectation of an in-line return from the stock in the coming months [12].

Core Insights - Pilgrim's Pride Corporation (PPC) successfully maintained margins in Q3 2025 despite a downturn in commodity chicken pricing, highlighting the importance of the U.S. Fresh segment, particularly the Case Ready and Small Bird businesses [1][9]. U.S. Fresh Segment Performance - The U.S. Fresh segment delivered strong results, supported by quality, service, and operational excellence, with Case Ready and Small Bird benefiting from robust retail and quick-service restaurant (QSR) demand [2][9]. - Case Ready outperformed category averages with higher-attribute offerings, leading to improved profitability both year-over-year and sequentially, establishing it as a high-value, low-volatility contributor [3]. - Small Bird's alignment with chicken-focused QSRs helped mitigate softness in the bone-in category, providing consistent demand amid changing consumer spending patterns due to inflation [3][5]. Operational Efficiency - The Fresh portfolio managed to absorb pressure from declines in Big Bird commodity prices through ongoing operational upgrades, resulting in comparable margins to the previous year despite significant drops in boneless breast prices [4][5]. - Improved yields, healthier bird performance, and better live operations contributed to maintaining margin stability across the Fresh segment [4][5]. Market Dynamics - Fresh chicken demand increased in retail as consumers shifted from beef due to a record price spread, creating a favorable demand environment for Case Ready and other Fresh cuts [5]. - The overall margin stability was primarily driven by the reliable performance of the fresh segment, benefiting from strong demand and continuous efficiency gains [5]. Stock Performance and Valuation - PPC shares have declined by 21.1% over the past three months, outperforming the industry decline of 27.5% but underperforming the broader Consumer Staples sector's drop of 4.7% [6]. - The stock currently trades at a forward 12-month P/E ratio of 8.22, significantly lower than the industry average of 13.51 and the sector average of 16.44, indicating a modest discount relative to peers and the broader consumer staples sector [10].

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Financial Data and Key Metrics Changes - For Q3 2025, the company reported net revenues of $4.8 billion, an increase from $4.58 billion in the previous year, reflecting a year-over-year sales growth of 2.3% in the U.S. and over 5% in Mexico [22][24] - Adjusted EBITDA for Q3 was $633 million with an adjusted EBITDA margin of 13.3%, compared to $660.4 million and a margin of 14.4% in Q3 2024 [22][24] - The effective tax rate for the quarter was 25.6%, with a year-to-date rate of 25% [24] Business Line Data and Key Metrics Changes - The Case Ready and prepared foods segments saw increased volumes, contributing to overall revenue growth [22][24] - In the U.S., adjusted EBITDA for Q3 was $479.1 million, down from $499.4 million a year ago, while adjusted EBITDA margins decreased to 16.9% from 18% [22][24] - In Europe, adjusted EBITDA margins were 7.9% for Q3 compared to 8.6% last year, driven by pricing actions to address lower European hog market prices [22][24] Market Data and Key Metrics Changes - The USDA indicated a 2.7% year-over-year growth in Ready to Cook Production for the U.S., with a forecasted 2% increase in broiler production for 2025 [5][6] - Chicken is the only protein expected to see an increase in availability, while beef, pork, and turkey are projected to decline [7] - Demand for chicken remains strong across retail and foodservice, with notable growth in boneless chicken breasts and thighs due to price competitiveness against beef [8][9] Company Strategy and Development Direction - The company is focused on diversifying its portfolio and enhancing operational efficiencies to mitigate volatility in commodity markets [5][19] - Investments in growth projects are on schedule, including the conversion of a Big Bird facility to case ready and the establishment of a new prepared foods facility [18][26] - The company aims to leverage its strong position in the chicken market, particularly in the retail segment, to drive future growth [15][18] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer behavior is shifting towards chicken due to its affordability amid rising food prices, with expectations of continued demand growth [8][40] - The company anticipates a stable pricing environment moving into Q4, with promotional activities expected to support demand [100][102] - Concerns about inflation and SNAP dollar reductions were acknowledged, but management remains optimistic about the resilience of chicken demand [101][102] Other Important Information - The company has reduced its scope 1 and 2 emissions intensity by 23% since 2019 and improved its global safety index by over 77% [20][21] - The company continues to emphasize cash flows from operating activities and disciplined investment in high-return projects, maintaining a strong balance sheet [25][26] Q&A Session Summary Question: Can you clarify the main drivers of the recent commodity price changes and expectations for Q4? - Management indicated that lower food traffic in foodservice has led to promotions featuring chicken, resulting in a 4% volume growth in foodservice and a 3% growth in retail chicken demand [39][40] Question: What percentage of pricing contracts is exposed to commoditized pricing? - Approximately 25% of the company's portfolio is exposed to commodity markets, with efforts to differentiate offerings even within the Big Bird category [42] Question: How do you view the input cost headwinds and export challenges in the EU UK segment? - Input costs are expected to stabilize as inventory flushes through, while export challenges are being addressed through differentiated offerings and long-term arrangements with key customers [62][67] Question: What is the outlook for the EU UK segment's profitability journey? - The company is focused on organic growth and innovation in Europe, with expectations for chicken production to grow by 20% over the next two years [72][73] Question: How has the portfolio changed in terms of exposure to commodity markets? - The company has reduced its exposure to pure commodity pricing by negotiating fixed prices with key customers, allowing for more stability in pricing [104]

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Financial Performance - Net revenue increased to $4,759.3 million in Q3 2025 from $4,585.0 million in Q3 2024[4] - Gross profit decreased from $684.0 million in Q3 2024 to $659.4 million in Q3 2025[4] - Operating income decreased to $492.6 million in Q3 2025 from $508.4 million in Q3 2024[4] - Net income decreased slightly to $343.1 million in Q3 2025 from $350.0 million in Q3 2024[4] - Adjusted EBITDA decreased year-over-year, primarily due to lower pricing in Mexico and lower volume in Europe[6] - Adjusted EBITDA margin decreased from 14.4% to 13.3%[4] - Net interest increased from $19.5 million to $29.0 million due to lower YoY cash balance during Q3 2025, as a result of the $2 billion in dividends paid in 2025[4, 6] Segment Performance - U S net revenue was $2,836.6 million with an adjusted operating income of $403.7 million and a margin of 14.2%[5] - Europe net revenue was $1,392.5 million with an adjusted operating income of $71.3 million and a margin of 5.1%[5] - Mexico net revenue was $530.2 million with an adjusted operating income of $39.0 million and a margin of 7.4%[5] Production and Inventory - Pullet placements increased 0.4% year-over-year in Q3 2025[7] - Broiler layer flock decreased 2.3% year-over-year in Q3 2025[12] - Total chicken inventories ended Q3 up 4.3% year-over-year[21]

Financial Performance - Pilgrim's Pride reported net income of $994.4 million, or $4.17 per diluted share, with net sales of $14.0 billion for the nine months ended September 28, 2025 [150]. - EBITDA for the nine months ended September 28, 2025, was $1.7 billion, with Adjusted EBITDA at $1.9 billion [150]. - Net sales for the nine months ended September 28, 2025 increased by $473.5 million, or 3.5%, to $13,979.7 million compared to the same period in 2024 [181]. - Gross profit for the nine months ended September 28, 2025 increased by $170.0 million, or 9.7%, from $1.76 billion to $1.93 billion [184]. - Operating income increased by $210.0 million, or 17.5%, to $1.4 billion for the nine months ended September 28, 2025, compared to $1.2 billion in the prior year [188]. - Net income for the nine months ended September 28, 2025, was $995.4 million, with Adjusted EBITDA reaching $1,853.2 million [216]. Sales and Revenue - U.S. net sales increased by $63.2 million, or 2.3%, driven by a sales volume increase of $131.0 million, or 4.7 percentage points, despite a decrease in sales price per pound [167]. - Europe net sales rose by $84.4 million, or 6.4%, due to higher sales prices and a favorable foreign currency translation impact of $83.8 million, or 6.4 percentage points [168]. - Mexico net sales increased by $26.8 million, or 5.3%, attributed to sales volume growth and favorable foreign currency translation [169]. - Net sales for the three months ended September 28, 2025 were $4,759.3 million, an increase of $174.4 million, or 3.8%, compared to the same period in 2024 [171]. Costs and Expenses - Cost of sales increased by $198.9 million, or 5.1%, from $3,901.0 million to $4,099.9 million for the three months ended September 28, 2025 [171]. - SG&A expense increased by $20.2 million, or 14.0%, from $144.8 million to $165.0 million for the three months ended September 28, 2025 [175]. - Net interest expense increased to $29.0 million for the three months ended September 28, 2025, up from $19.5 million in the same period in 2024 [178]. - The cost of sales for U.S. operations increased by $205.9 million, or 3.0%, primarily due to increased sales volume and costs per pound sold [185]. - SG&A expenses totaled $498,233, reflecting a $20,216 increase or 4.2% from the prior year, with U.S. SG&A expenses increasing by 9.8% [188]. Cash Flow and Dividends - Cash provided by operating activities was $1,080.4 million for the nine months ended September 28, 2025, down from $1,640.8 million in the prior year [200]. - The company declared a special dividend of $6.30 per share, totaling approximately $1.5 billion, paid on April 17, 2025 [197]. - Cash used in financing activities was $2,112.5 million for the nine months ended September 28, 2025, significantly higher than $150.5 million in the same period in 2024, mainly due to special cash dividends [211]. Market and Economic Factors - The company anticipates that global market prices will depend on factors such as feed production costs and shifts in trade policy [163]. - A hypothetical 10% increase in feed ingredient prices would increase costs by approximately $77.5 million for the three months ended September 28, 2025 [220]. - A 10% weakening of the Mexican peso would decrease net assets of Mexican subsidiaries by $61.5 million as of September 28, 2025 [226]. - A 10% weakening of the British pound would decrease net assets of European subsidiaries by $89.6 million as of September 28, 2025 [228]. Risks and Challenges - The company acknowledges risks related to fluctuations in commodity prices for feed ingredients, pigs, and chicken, which could impact operations [234]. - Potential outbreaks of avian influenza or other diseases may affect the company's ability to conduct operations and demand for poultry products [235]. - The company faces risks from product contamination leading to liability claims and recalls, which could incur significant costs [235]. - Changes in laws or regulations, particularly regarding climate change and sustainability, may impact the company's operations [235]. - Competitive factors, inflation, and pricing pressures could affect the company's market position and profitability [235]. - The company may encounter challenges in effectively integrating acquisitions and realizing anticipated cost savings [235]. - Disruptions in international markets due to geopolitical events, such as the Russia-Ukraine war, could impact distribution channels [235]. - Cyber-attacks and natural disasters pose risks to the company's information systems and operational continuity [235]. - The company must maintain favorable labor relations and comply with labor laws to avoid operational disruptions [235]. - Uncertainties in litigation and other risk factors may affect the company's business and operational results [235].

Financial Performance - Net sales for Q3 2025 reached $4.8 billion, with a consolidated GAAP operating income margin of 10.4%[2] - GAAP net income was $343.1 million, resulting in a GAAP EPS of $1.44, while adjusted net income was $362.9 million with an adjusted EPS of $1.52[2] - Adjusted EBITDA for the quarter was $633.1 million, representing a margin of 13.3%[2] - Net sales for the three months ended September 28, 2025, were $4,759,342, an increase of 3.8% compared to $4,584,979 for the same period in 2024[17] - Gross profit for the nine months ended September 28, 2025, was $1,929,552, representing a 9.6% increase from $1,759,505 in the prior year[17] - Operating income for the three months ended September 28, 2025, was $492,608, a decrease of 3.1% from $508,354 in the same period of 2024[17] - Net income for the three months ended September 28, 2025, was $343,061,000, compared to $349,990,000 for the same period in 2024, reflecting a decrease of approximately 2.7%[31] - Adjusted EBITDA for the three months ended September 28, 2025, was $633,078,000, down from $660,379,000 in the same period of 2024, indicating a decline of about 4.1%[34] - Net income for the nine months ended September 28, 2025, was $995.413 million, an increase from $851.451 million for the same period in 2024, representing a growth of approximately 16.9%[39] - Adjusted EBITDA for the nine months ended September 28, 2025, was $1,853.225 million, compared to $1,688.210 million for the same period in 2024, reflecting an increase of about 9.8%[39] Sales Growth - U.S. Prepared Foods net sales increased by over 25% compared to the prior year, with Just Bare leading growth in the retail frozen fully cooked category[2] - In Mexico, Prepared Foods sales increased by 9% year-over-year, driven by Key Customer demand in fresh[2] - U.S. net sales for the three months ended September 28, 2025, were $2,836,613,000, an increase of 2.3% from $2,773,391,000 in the same period of 2024[59] - Europe contributed $1,392,495,000 to net sales for the three months ended September 28, 2025, reflecting an increase of 6.4% from $1,308,127,000 in the prior year[59] Investments and Agreements - The company announced new investments exceeding $500 million over the next two years to support growth with Key Customers in Fresh and diversify its portfolio[2] - In Europe, a new 10-year supply agreement was established to support a Key Customer, with Fridge Raiders and Rollover growing faster than category averages[2] Environmental and Safety Initiatives - Pilgrim's Pride reduced its global Scope 1 & 2 emissions intensity by 23% since 2019 and improved its Global Safety Index by 77%[2] Financial Position and Liquidity - The company maintained a strong liquidity position with net leverage approximately 1.0 times of Adjusted EBITDA after $2 billion in special dividends during the year[2] - Total assets as of September 28, 2025, were $9.95 billion, with total liabilities at $6.40 billion[15] Operating Expenses and Other Financial Metrics - Interest expense for the three months ended September 28, 2025, was $28,990,000, compared to $19,498,000 in the same period of 2024, reflecting an increase of about 48.7%[31] - Income tax expense for the three months ended September 28, 2025, was $118,319,000, down from $131,609,000 in the same period of 2024, indicating a decrease of approximately 10.1%[31] - Depreciation and amortization for the three months ended September 28, 2025, was $116,426,000, compared to $110,470,000 in the same period of 2024, reflecting an increase of about 5.4%[31] - Payments for dividends amounted to $1,994,347 for the nine months ended September 28, 2025, with no payments in the prior year[19] Litigation and Restructuring - The company reported litigation settlements of $19,582,000 for the three months ended September 28, 2025, compared to no settlements in the same period of 2024[52] - Restructuring activities losses for the three months ended September 28, 2025, were $1,779,000, down from $30,836,000 in the same period of 2024, indicating a significant decrease of approximately 94.2%[34] - Restructuring activities losses in Europe amounted to $21.890 million for the nine months ended September 28, 2025, compared to $82.070 million in the same period of 2024[46]