BMO Capital Markets analyst Andrew Strelzik upgraded Pilgrims Pride Corp (NASDAQ:PPC) to Outperform from Market Perform at an increased price target of $28 (from $26).
The analyst is bullish on increased investor optimism on PPC’s acquisition by JBS Food Group following its U.S. listing announcement yesterday.
Notably, JBS currently owns 82%-83% of PPC shares, and the analyst expects the acquisition will limit the downside related to the softer U.S. chicken margin environment.
The analyst sees a higher probability for lower feed costs to benefit PPC’s U.S. chicken margins in the coming quarters.
Recently, USDA increased expectations for 2023/2024 U.S. corn planted acres to over 94 million, with favorable weather lessening the risk to corn yields.
Hence, Strelzik expects every $0.25 drop in U.S. corn prices to benefit PPC EPS by $0.15.
The analyst sees a potential improvement in supply/demand, driving increased chicken prices.
However, Strelzik lowered adjusted EPS estimates for Q2 ($0.29 from $0.37) and Q3 due to the recent softer U.S. chicken margins.
Also, the analyst now expects an adjusted EPS of $1.20 (prior $1.39) and EBITDA of $951 million (previous $1.008 billion) for 2023.
Price Action: PPC shares are up 6.51% at $24.64 on the last check Thursday.
