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What: Shares of chicken-processor Pilgrim's Pride were looking tasty today, jumping 10% after its larger rival Tyson Foods beat earnings estimates and forecasted higher chicken prices.
So what: In its earnings report, Tyson said meat production would continue to shrink this year, and demand for chicken has been growing as consumers switch from beef. It tripled operating profit in its chicken segment in the quarter, and said that chicken prices climbed 8.2% in the period. Last summer's drought in the Midwest has hurt livestock production across the board, and beef, in particular, and Tyson forecasted a 1% decline in beef, pork, and poultry production for the year.
Now what: Pilgrim's Pride reports earnings February 15th, and clearly the bar just got raised. Analysts had been expecting a $0.06 loss as the industry is seasonal, but will probably raise their expectations after today's news. I don't see any long-term competitive advantage in Pilgrim's Pride, but in the near term, the company looks poised to benefit from the drought and higher poultry prices.
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The article Why Pilgrim's Pride Shares Popped originally appeared on Fool.com.Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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