Pilgrim's Pride says still on road to recovery

CHICAGO Aug 4 (Reuters) - Pilgrim's Pride Corp PGPDQ.PK Corp is now profitable, due to lower feed costs and cost cutting activities, but there still may be bumps on its road out of bankruptcy as the weak U.S. economy continues to impede sales, the company and analysts said on Tuesday.

Once the largest U.S. chicken producer, Pilgrim's Pride has shrunk since it filed bankruptcy in December. The Pittsburg, Texas, company has closed plants, cut production and laid off workers, as it aims to exit bankruptcy by the end of 2009.

"While we were pleased to return to profitability in the (fiscal) third quarter, we're not satisfied with the results," spokesman Gary Rhodes told Reuters on Tuesday.

"We benefited from lower feed costs and cost savings in the third quarter, but we have to continue looking for ways to operate more efficiently," he added.

The weak economy and consumer demand continue to weigh on the industry, he said.

On Monday, Pilgrim's Pride reported a third-quarter profit of $53.24 million, or 72 cents a share, on sales of $1.78 billion, compared with a year earlier loss of $52.78 million, or 75 cents a share, on sales of $2.21 billion.

The results impressed BMO Capital Markets analyst Kenneth Zaslow, who wrote on Tuesday that he raised his fourth quarter earnings estimate for the company to 49 cents a share from the previous 13 cents. His fiscal year estimates went to a $2.23 share loss from his previous $2.50 loss.

Pilgrim's was forced into bankruptcy partly because of record high costs for feed and fuel last year. Gasoline is now under $3 a gallon versus more than $4 a year ago, and feed corn is at $3.50 per bushel versus a record high $7.65 a year ago.

However, meat companies have said the weak economy has made it hard to sell meat as consumers shy away from restaurants and eat more lower-cost items, such as hot dogs and lunch meat, at home.

Tyson Foods Inc (TSN.N), the largest U.S. meat company and chicken producer, on Monday reported a profit in all of its meat segments, but warned then the weak economy may pressure fourth quarter results, which run through September.[ID:nN03277378]

An abundance of competing meats, particularly pork, has hurt chicken prices, particularly breast meat, said Paul Aho, an economist at Poultry Perspective.

Prices for breast meat, which is an important revenue stream for chicken companies, fell to $1.37 lb in some markets last week from $1.50 in early July, USDA said.

"They kind of fell apart after July 4 and never recovered," he said of the breast meat.

Leg quarters, an important export item, also dropped, going from 50 cents a lb in early July to about 40 cents last week, hurt by a slowdown in exports, analysts said. (Reporting by Bob Burgdorfer; Editing by Marguerita Choy)