Pilgrim's Pride' stock offering raises concern

Pilgrim's Pride Corporation recently announced that it has priced a public offering of 7,500,000 shares of common stock at US$24 per share.

The offering, made through Lehman Brothers Inc. as sole underwriter, is expected to close on 16 May, 2008, subject to standard closing conditions. The company will use the net proceeds of the offering to reduce outstanding indebtedness under its credit facilities and for general corporate purposes.
Meatingplace, however, reports that this move has raised concerns for Wall Street analysts about the company's debt load and its ability to cash in on rising poultry prices.
"We are surprised that the company is choosing to issue equity at the bottom of the commodity cycle, particularly given that the company had negotiated more liberal terms in its credit agreements," Stephens Inc. analyst Farha Aslam reportedly wrote in a note to investors.
While seeing the move as neutral to earnings, JPMorgan analyst Pablo Zuanic wrote in a note to investors, "We remain concerned that PPC faces company-specific issues that may not allow it to benefit from better chicken economics in the next six months."
Aslma said that while the equity offering erases some of the upside in the stock, "We believe our $30 price target is still very achievable."
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