Pilgrim’s Pride Earnings: Shares Look Overvalued After All-Time High Amid Prime Conditions

No-moat Pilgrim’s Pride reported robust second-quarter results as market conditions for chicken remain very favorable. Net sales were up nearly 6% to $4.6 billion, but adjusted EBITDA exploded by more than 160% to $656 million. Not only is margin nearing historical peaks (more than 14% for the quarter), but the stock has also reached an all-time high. We expect to increase our fair value estimate of $32 by a high-single-digit percentage for more favorable chicken markets for longer than we previously thought. But prime conditions—falling feed costs, rising demand boosted by consumers switching from expensive beef, and lower inventories—do not represent structural changes as proteins still belong to commodity markets that face cyclicality. Thus, we see downside risk from current prices.