Tuesday, October 28, 2008

Pilgrim's Pride (PPC) is now a $1 Stock

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It does feel like End of Days when I see some of these stocks; we've been following the meat producers for completely different reasons (food inflation) since blog inception - but we pointed out how the credit crunch was hitting Pilgrim's Pride (PPC) about a month ago [Sep 25: Pilgrim's Pride May Be Out of Compliance with Covenant] The stock was down 35% when I wrote the piece in September, down to $4.10s

Today? Well, it's down 35% again. Only this time, down to the $1.30s - and there goes the country's largest chicken producer.... debt is simply toxic in this market. I can't even say cash is king because it's not helping stocks to have cash - but at least it keeps you from prospective bankruptcy.
  • A flurry of paper, gaming and consumer-related companies could face a cash crunch in the year ahead as the ability to raise capital remains squeezed, fixed-income research service CreditSights said in a report.
  • Despite dramatic government attempts to revive the lending markets, yields on corporate bonds remain far too high for many companies to issue debt, effectively shutting them out of the bond market.
  • Average yields for high-grade corporate bonds have hit a record 6.1 percentage points over those on comparable U.S. Treasuries, while junk bond yields are at an all-time high of 16.8 percentage points over Treasuries.
  • Shares of Pilgrim's Pride Corp. slipped Monday, even after the nation's largest chicken producer said it had reached another agreement to temporarily extend its credit facilities through the end of November.
  • Stephens Inc. analyst Farha Aslam wrote in a research note Monday that it was good news the company received an extension but, she warned, "the fact that the company was not able to secure more permanent financing is telling. The troubles in the industry are considerable, particularly given the weakening export environment."
Very scary times indeed because unlike the dot com bubble; this is effecting the entire real economy in much harsher terms. The perverse situation here, if the company survives in anything similar to current form it will be cutting chicken production to conserve cash - increasing prices in the medium term as "chicken capacity" is cut. Just what US consumers need.

Or perhaps as US taxpayers we will soon own our own chicken processing plants ....

[Sep 25: Cash is King: Pilgrim's Pride Down 40%]
[Mar 12: Pilgrims Pride Cutting Chicken Output]

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