Pilgrim's Pride revenue falls 2.8% to $4.63B as chicken supply weighs

Pilgrim's Pride Corp. reported second-quarter net revenue of $4.63 billion, missing analyst estimates as higher chicken supply and lower commodity pricing compressed margins across its U.S. and Mexico operations.

"The chicken category remains a strong affordable protein option for consumers," President and Chief Executive Officer Fabio Sandri said. "However, a 4.5% year-over-year increase in U.S. ready-to-cook chicken production during the quarter exceeded demand growth."

Adjusted EBITDA fell to $360 million from $686.9 million a year earlier, with margin contracting to 7.8% from 14.4%. Adjusted earnings per share of 64 cents missed the consensus estimate of 66 cents, according to data compiled by MarketBeat. Revenue of $4.63 billion came in below the $4.70 billion analysts had expected, a 2.8% decline from $4.76 billion in the same quarter last year.

The Greeley, Colorado-based poultry producer, a wholly owned subsidiary of JBS SA, has been investing in branded and value-added products to offset volatility in commodity markets. U.S. prepared-foods volumes rose nearly 14% from a year earlier, while retail sales of its Just Bare brand increased more than 30%, giving it nearly 15% share of the frozen fully cooked chicken category.

U.S. margins pressured by commodity pricing

The U.S. segment generated $2.65 billion in revenue, down from $2.82 billion, while adjusted EBITDA fell to $231.5 million from $482.7 million. Chief Financial Officer Matt Galvanoni attributed the decline primarily to a 27% decrease in the jumbo cutout value. Margins improved sequentially as plant upgrades were completed and live operations recovered from first-quarter downtime.

Sandri said the U.S. industry benefited from improved bird livability during the quarter, contributing more than one percentage point of the supply increase. The USDA expects supply to grow about 2.5% in the third and fourth quarters, and the company plans to align production with demand from key customers.

Mexico and Europe face headwinds

Mexico generated adjusted EBITDA of $22.6 million, down from $92.3 million, with margin declining to 3.9% from 16.3%. Unusually favorable growing conditions increased chicken supply, while expanded domestic egg production and pork imports added to overall protein availability. Despite the pressure, retail-branded fresh-product volumes in Mexico rose more than 30%.

In Europe, adjusted EBITDA was $105.8 million compared with $111.8 million a year earlier. Pork margins were pressured by increased imports into the U.K. and weaker foodservice traffic, Sandri said.

Legal costs and balance sheet

The company recorded $136 million in legal settlement expenses related to ongoing broiler litigation and a $26 million charge tied to the planned shutdown of its Chattanooga harvesting facility. Pilgrim's Pride completed a $250 million tender offer for its 2033 bonds during the quarter, reducing net debt to below $2.5 billion. Leverage stood at 1.43 times last-12-month adjusted EBITDA.

Capital expenditures totaled $230 million in the quarter, bringing year-to-date spending to $465 million. Galvanoni reaffirmed full-year capital expenditure expectations of about $900 million.

The earnings miss signals that elevated protein supply will continue to pressure margins in the near term. Investors will watch for signs of production moderation in the second half, when seasonal cuts and fading livability gains are expected to tighten supply.

This article is for informational purposes only and does not constitute investment advice.