Pilgrim’s Pride (PPC) could be a solid choice for investors given its recent upgrade to a Zacks #1 rank (Strong Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces affecting stock prices.
The Zacks rating is based solely on the evolution of a company’s earnings. It tracks EPS estimates for the current year and beyond from sell-side analysts covering the stock through a consensus metric – the Zacks Consensus Estimate.
Since a changing earnings picture is a powerful factor influencing short-term stock price movements, the Zacks Rating System is very useful for individual investors. They may find it difficult to make decisions based on rating upgrades by Wall Street analysts, as these are primarily driven by subjective factors that are difficult to see and measure in real time.
Therefore, Zacks’ rating upgrade for Pilgrim’s Pride essentially reflects positive earnings outlook, which could translate into buying pressure and an increase in its stock price.
The most powerful force impacting stock prices
Changes in a company’s future earnings potential, as reflected in earnings estimate revisions, and short-term changes in its stock prices have been found to be highly correlated. This is partly because of the influence of institutional investors who use earnings and earnings estimates to calculate the fair value of a company’s stock. An increase or decrease in earnings estimates in their valuation models simply translates to a higher or lower fair value for a stock, and institutional investors typically buy or sell it. Their mass investment action then leads to a price movement for the stock.
Fundamentally speaking, the rise in earnings estimates and the consequent rating upgrade of Pilgrim’s Pride imply an improvement in the company’s underlying business. Investors should show their appreciation for this improving trading trend by pushing the stock higher.
Harnessing the Power of Earnings Estimate Revisions
Empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock movements, so it could be really rewarding if these revisions are followed when making an investment decision. This is where the proven Zacks Rank stock rating system plays an important role, as it effectively harnesses the power of earnings estimate revisions.
The Zacks Rank stock rating system, which uses four factors tied to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive track record. externally audited record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988. You can see the full list of Zacks #1 Rank (Strong Buy) stocks today here >>>> .
Revisions to income estimates for Pilgrim’s Pride
For the fiscal year ending December 2022, this poultry producer is expected to earn $2.78 per share, which is a change of 21.9% from the figure reported a year ago.
Analysts have steadily raised their estimates for Pilgrim’s Pride. Over the past three months, Zacks’ consensus estimate for the company has risen 9%.
Unlike overly optimistic Wall Street analysts whose rating systems tend to favor favorable recommendations, the Zacks rating system maintains an equal proportion of “buy” and “sell” ratings for its entire universe of over 4 000 shares at any time. Regardless of market conditions, only the top 5% of stocks covered by Zacks earn a “Strong Buy” rating and the next 15% earn a “Buy” rating. Thus, placing a stock in the top 20% of stocks covered by Zacks indicates its superior earnings estimate revision function, making it a strong candidate for delivering above-market returns in the short term.
You can read more about the Zacks Ranking here >>>
Upgrading Pilgrim’s Pride to Zacks No. 1 rank puts it in the top 5% of stocks covered by Zacks in terms of estimate revisions, implying that the stock could rise in the near term.
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