PPC – Market expectations are for Uniform ROA to improve, but management may have concerns about their European operations, protein demand, and pandemic-related trade headwinds

• Pilgrim’s Pride Corporation (PPC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with an 18.5x Uniform P/E. Even at these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about their legacy European operations, international protein demand, and the pandemic’s effect on global trade
• Specifically, management may lack confidence in their ability to strengthen their legacy European operations, sustain strong revenue growth, and expand the retail distribution for their Just BARE brands. Moreover, management may have concerns about staffing issues, their portfolio mix following the conversion of a commoditized big bird deboning facility, and the pandemic’s impact on global trade. They may also be exaggerating the recovery of quick-service restaurants as well as their ability to leverage their portfolio strategy to mitigate the impact of challenging market dynamics. Finally, management may have concerns about the sustainability of their export potential, the availability of crop and protein supply, and protein demand in China