The Pride and the Shame: Chicken-Pork Processor Gets Salamied (PPC, DE)

Company’s President and CEO cashes out

one day after stock sets all-time high!

The Holy One, Blessed Be He, has afforded us a trade today that capitalizes on some excellent pricing features – and could deliver 2900% on a rather modest move in the underlying…

So let’s at it!

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Colorado’s Pilgrim’s Pride (NYSE:PPC) was Wall Street’s flavor of the day while news of the Avian Flu was spreading, and the foul and senseless slaughter of the country’s fowl gained speed.

But it never takes long for these things to get overdone – bar-b-charred, even – and PPC is no exception.

We’re going to examine the best way to cook up Pilgrim’s Pride (and add a little seasoning while we’re at it), but first we have a trade to close.

Nothing Runs up Profits Like a Deere

We’re shutting down our Deere (NYSE:DE) initiative today.  All her details can be found HERE.

To sum, we’re now in possession of two short DE 330 CALLs that expire next Friday and a credit of $24.08.

The CALLs sell for $11.35 each, and we’re recommending you repurchase them now.

Yes, we could hold for a better price – who knows? – they might even expire worthless!

But they also may not.

So buy them back (please) and exit with $1.38 NET on an initial expenditure of $1.75.

And that’s a dandy 78%.

It’s Pilgrim’s Pride, Daddy-o…

Okee-dokee!

Pilgrim’s Pride has profited abundantly from the reduced supply/higher inflation dynamic of the last year, thus far avoiding any of the aforementioned Avian bird infection.

That said, a number of former PPC execs were recently indicted in a price-fixing scandal that will most certainly reduce the company’s cock-a-doodle-do.

In fact, the shares already appear to be losing some of their honey-garlic.

First, Some Fundamentals

But before we get to the tell-all chart, consider the following –

• The stock carries an expansive earnings multiple of 35.28 – and it’s entirely undeserved, we say. The proof is in the forward P/E, which stands at just 9.70, according to consensus.  That essentially means the stock’s price has to be cut by nearly three quarters – or earnings have to almost quadruple over the next year – to align with Wall Street’s prognostics.

• Dividend Yield is NIL,
• Price to Book is 2.66, and
• Debt/Equity is (too high) at 1.23.
• Moreover, EPS FELL this year by 67.00% (!), and
• Are expected to DECLINE a further 5.35% in the coming twelve months, according to consensus.
• Just for comparison sake, EPS over the LAST FIVE YEARS have declined on average by 40.70%.  And that’s outright pathetic.
• Adding insult to injury, the company’s new President and CEO doesn’t want his stock!  In the last month he unloaded a third of his holdings for roughly $7.5 million – and a huge bulk was released just five sessions back, directly after the stock hit an all-time high.

Go figure…

Then take a peek at the chart –

After that, the cash runs like a chicken with its head cut off.

Sorry…

Couldn’t help ourselves.

May the Holy One be praised!

With kind regards,

Hugh L. O’Haynew

Follow @HughLOHaynew