Pilgrim's Pride Corporation PPC declared that it has concluded the acquisition of the renowned branded chicken products provider in the Upper Midwest – GNP Company – with an all-cash amount of $350 million. The transaction is likely to boost Pilgrim's Pride’s existing product portfolio and operational efficacy in the near term.

Over the last one month, Pilgrim's Pride’s stock recorded a return of 1.22% – outperforming the S&P 500 return of 0.87%. However, the return provided by the Zacks classified Food-Meat Products industry was 3.20% over the same frame. Whether the company’s latest buyout can turn the tables for this Zacks Rank #3 (Hold) stock remains to be seen as it projects to bolster adjusted earnings in 2017 and bring about cost synergies worth $20 million from this deal.

Acquisition Benefits

Pilgrim’s Pride intends to improve its existing product portfolio, expand business in new markets and widen customer base on the back of this acquisition. For instance, inclusion of GNP Company’s Just BARE Certified Organic and Natural/American Humane Certified/No-Antibiotics-Ever (‘NAE’) product lines would enable the acquirer to cater to the rising demand for organic chicken products.

Pilgrim’s Pride is aimed at improving its production process and enhancing its overall operational performance, by adopting GNP Company’s exclusive technologies, such as automated deboning, aeroscalding and gas stunning.

Moving Ahead

Pilgrim’s Pride believes that the above mentioned buyout would augment its adjusted earnings in 2017. This transaction would fortify the company’s financial position, capital structure and cash flow performance, moving ahead. In addition, the move is estimated to create roughly $20 million in annualized cost synergy, primarily due to the optimization of purchases, production, logistics and marketing activities. Further, Pilgrim’s Pride anticipates nearly $28 million tax savings (in terms of current value) and post synergies Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) multiple of 3.9x from the buyout.

Stocks to Consider

Some better-ranked stocks within the industry are listed below:

B&G Foods, Inc. BGS, which has recorded an average earnings surprise of 12.16% for the last four quarters, currently boasts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Calavo Growers, Inc. CVGW also sports a Zacks Rank #1 and witnessed an average earnings surprise of 11.81% over the trailing four quarters.

Dean Foods Company DF, currently carrying a Zacks Rank #2 (Buy), has an average earnings surprise of 5.44% for the last four quarters.

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Calavo Growers, Inc. (CVGW): Free Stock Analysis Report
 
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