Pilgrim's Pride CEO Indicted for Price Fixing

Pilgrim's Pride's CEO and others are charged with fixing prices and rigging bids on chickens sold to restaurants and grocery stores from 2012-2017.
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Shares of Pilgrim’s Pride  (PPC) - Get Report plunged Wednesday after the country’s second-biggest chicken producer saw its CEO indicted by the Justice Department for price fixing.

The CEO is Jayson Penn. He was charged along with Pilgrim Vice President Roger Austin and two executives at Claxton Poultry Farms, The Wall Street Journal reported. The Claxton executives are President Mikell Fries and Vice President Scott Brady

The group was charged with fixing prices and rigging bids on chickens sold to restaurants and grocery stores from 2012-2017, according to the Journal. The Justice Department has been investigating chicken producers for some time.

Morningstar analyst Rebecca Scheuneman gave Pilgrim’s Pride a less than stellar review last week.

“Even though Pilgrim’s Pride is the second-largest poultry producer in the countries in which it operates, we don’t believe it has carved out an edge,” she wrote in a commentary.

“About 83% of Pilgrim’s products are undifferentiated and therefore have difficulty commanding a price premium and higher returns.”

Factors outside the firm’s control affect costs, including weather, flock disease and global trade, Scheuneman said.

“The prices of the primary feed ingredients can be quite volatile, surging in 2008 and leading to Pilgrim’s bankruptcy,” she wrote.

“Since then, the industry has moved to new pricing strategies, which are helping protect the processors from revenue/cost mismatches. However, despite Pilgrim’s size, we don’t believe this affords it a scale cost advantage, underpinning our no-moat rating.”

Pilgrim’s shares recently traded at $18.68, down 10.49%. The stock has dropped 13% over the last three months, including Wednesday’s move, compared to a 1% increase for the S&P 500.

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