Pilgrim's Pride (NASDAQ: PPC) reported Q1 EPS of $0.35, in-line with the analyst estimate of $0.35. Revenue for the quarter came in at $2.72 billion versus the consensus estimate of $2.74 billion.

First Quarter Highlights

• Net Sales of $2.72 billion.
• Net Income of $84.0 million.
• Operating Income margins of 6.1% in U.S., 2.9% in Mexico and 2.5% in Europe operations, respectively.
• Adjusted EBITDA of $204.4 million (or a 7.5% margin), and Adjusted EPS of $0.35.
• Significant sequential rebound in U.S. operations vs. Q4, driven by stronger markets as feature activities tracked much closer to seasonality. Our balanced portfolio has continued to evolve, realizing the results of investments made over the past few years to further widen our products and brands, strengthen key customer relationships, and improve margin consistency.
• Weaker than seasonal markets in Mexico impacted results but conditions are already improving in Q2. Diversification into premium Pilgrim’s brand is gaining momentum and producing strong results, together with significant growth in Prepared Foods.
• In-line with the industry, Europe continued to be impacted by a substantial increase in input costs. We are offsetting the increase through capture of synergies and adjustments in pricing models.

“After a very challenging market in 2018, we experienced a much better environment within our U.S. operations during Q1 particularly in commodity large bird deboning, with demand from retailers and QSR operators rebounding as they recognized the value of chicken. Feature activities normalized to seasonal levels throughout the quarter and the momentum has been sustained into early Q2. Commodity boneless prices have already surpassed levels from a year ago and are close to the five-year average, while wing prices are near historical highs. We have been heavily investing in further differentiating our portfolio to increase our capacities and capabilities to meet customer expectations. The investments in the operations and the focus of our people have yielded an increase in performance, and further growth prospects remain available. We are driving growth while continuing to pursue future opportunities by intensifying our efforts in innovation and marketing. We expect value added, differentiated products to account for a larger portion of our total results over the next few years as we continue to reduce the volatility of our commodity sales mix,” stated Jayson Penn, Chief Executive Officer of Pilgrim's.

“Market balance dynamics in Mexico were weaker than seasonal in Q1. Better than expected growing conditions and softer demand have impacted prices. Chicken demand was also affected by more availability of imported pork from the U.S. during the quarter but we believe chicken demand can continue to grow in-line with historical rates longer term. The environment has already started to recover in Q2 and prices have begun to react positively, with growing conditions reverting back to normal, demand improving, and competition from pork imports declining. Our Prepared Foods have continued to grow at a double digit rate and are generating great results under both premium Pilgrim’s and Del Dia brands to drive the evolution of our Mexican portfolio towards more differentiated, higher-value products giving us a clear path to margin expansion.”

“In-line with the whole industry, our European operations continued to be impacted by a substantial increase in input costs, including feed ingredients, higher utilities, labor and packaging. These increases were partially offset by cost reduction initiatives, synergies and price adjustments some of which have taken slightly longer than expected to be passed on and reflected in customer contracts. Despite the impact in results, we expect an improvement month over month as we adjust our prices based on key customer’s contracts and expect the full recovery within our pricing models.”

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