Poultry Investors Cry Fowl

Pilgrim's Pride shares dived 24% to a 52-week low of $25.36 Tuesday after the nation's No. 2 poultry producer halved its earnings guidance for the just-ended December quarter.

The Pittsburg, Texas, company blamed a 42% drop in chicken prices on weak European demand due to bird-flu worries and oversupply in Mexico.

"We often highlighted the extraordinary degree of earnings sensitivity at Pilgrim's Pride to chicken market prices, and to a lesser, but still strong, degree feed costs," wrote David Nelson, an analyst at Credit Suisse First Boston, in a note Tuesday.

"We believe the big area of change is in leg quarters, which are exported and cannot be priced significantly forward. We believe at least some of this is due to consumer concern in the export markets regarding avian influenza."

For its fiscal first quarter ended Dec. 31, Pilgrim's Pride sliced its adjusted earnings forecast to between 36 cents and 41 cents a share, down from its previous guidance of 75 cents to 85 cents. The company also withdrew its previous guidance of $3.50 to $4 a share for all of fiscal year 2006. Management will update the outlook on Jan. 23, when Pilgrim's Pride releases first-quarter earnings. Thomson First Call recently published consensus estimates of 82 cents and $3.71 for the quarter and year, respectively.

Source: Smart Money
calendar icon 4 January 2006
clock icon 1 minute read
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