Pilgrim's Pride (PPC)

Chicken producer Pilgrim’s Pride (NASDAQ:PPC) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 3.8% year on year to $4.76 billion. Its non-GAAP profit of $1.52 per share was 9.9% above analysts’ consensus estimates.

Company Overview

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.

The perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.

Competitors in the chicken market include Tyson Foods (NYSE:TSN) and private companies Perdue Farms, Sanderson Farms, and Koch Foods.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.

With $18.35 billion in revenue over the past 12 months, Pilgrim's Pride is larger than most consumer staples companies and benefits from economies of scale, enabling it to gain more leverage on its fixed costs than smaller competitors. Its size also gives it negotiating leverage with distributors, allowing its products to reach more shelves. However, its scale is a double-edged sword because there are only so many big store chains to sell into, making it harder to find incremental growth. For Pilgrim's Pride to boost its sales, it likely needs to adjust its prices, launch new offerings, or lean into foreign markets.

As you can see below, Pilgrim's Pride’s sales grew at a sluggish 1.8% compounded annual growth rate over the last three years. This shows it failed to generate demand in any major way and is a rough starting point for our analysis.

This quarter, Pilgrim's Pride reported modest year-on-year revenue growth of 3.8% but beat Wall Street’s estimates by 0.8%.

Looking ahead, sell-side analysts expect revenue to decline by 1.7% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and implies its products will face some demand challenges.

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

Pilgrim's Pride has bad unit economics for a consumer staples company, signaling it operates in a competitive market and lacks pricing power because its products can be substituted. As you can see below, it averaged a 12.5% gross margin over the last two years. Said differently, for every $100 in revenue, a chunky $87.46 went towards paying for raw materials, production of goods, transportation, and distribution.

This quarter, Pilgrim's Pride’s gross profit margin was 13.9%, down 1.1 percentage points year on year. On a wider time horizon, however, Pilgrim's Pride’s full-year margin has been trending up over the past 12 months, increasing by 2 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Pilgrim's Pride has done a decent job managing its cost base over the last two years. The company has produced an average operating margin of 8.5%, higher than the broader consumer staples sector.

Analyzing the trend in its profitability, Pilgrim's Pride’s operating margin rose by 1.7 percentage points over the last year, as its sales growth gave it operating leverage.

In Q3, Pilgrim's Pride generated an operating margin profit margin of 10.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

In Q3, Pilgrim's Pride reported adjusted EPS of $1.52, down from $1.63 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 9.9%. Over the next 12 months, Wall Street expects Pilgrim's Pride’s full-year EPS of $5.88 to shrink by 26.6%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Pilgrim's Pride has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.4% over the last two years, slightly better than the broader consumer staples sector.

Taking a step back, we can see that Pilgrim's Pride’s margin dropped by 3.7 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity.

Pilgrim's Pride’s free cash flow clocked in at $276.5 million in Q3, equivalent to a 5.8% margin. The company’s cash profitability regressed as it was 6.1 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Pilgrim's Pride’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 12.2%, slightly better than typical consumer staples business.

Pilgrim's Pride reported $612.6 million of cash and $3.29 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.38 billion of EBITDA over the last 12 months, we view Pilgrim's Pride’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $100 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Pilgrim's Pride blew past analysts’ EPS expectations this quarter. We were also glad its gross margin outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The market seemed to be hoping for more, and the stock traded down 1.4% to $37.60 immediately after reporting.

Updated: December 4, 2025 at 9:48 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Pilgrim's Pride, you should also grasp the company’s longer-term business quality and valuation.

Pilgrim's Pride doesn’t pass our quality test. To begin with, its revenue growth was uninspiring over the last three years, and analysts expect its demand to deteriorate over the next 12 months. And while its unparalleled brand awareness makes it a household name consumers consistently turn to, the downside is its projected EPS for the next year is lacking. On top of that, its gross margins make it more challenging to reach positive operating profits compared to other consumer staples businesses.

Pilgrim's Pride’s P/E ratio based on the next 12 months is 9.3x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $44.29 on the company (compared to the current share price of $39.61).