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A Wet Kiss From GoldKist

Add another check-mark to the roster of troubled meat companies. Gold Kist (Nasdaq: GKIS  ) reported results that, to nobody's surprise, back up the idea that this was a really tough quarter for poultry.

Sales dropped nearly 16% this quarter as the company took a one-two punch of lower volume (down almost 2% in pounds) and lower prices (down about 15%). With less revenue to put through the system, margins fell apart. Gross margin stayed barely positive, and operating income was pushed into the red. For those who pay more attention to the quasi-cash flow metric-adjusted EBITDA, that figure, too, was just barely above the water line.

Quite frankly, Gold Kist is seeing the same sort of environment as everyone else and responding essentially the same. Corn costs more, soy meal costs less, and energy and freight costs continue to march upwards. And just like Tyson (NYSE: TSN  ) , Pilgrim's Pride (NYSE: PPC  ) , and Sanderson Farms (Nasdaq: SAFM  ) , there's the hope that lower production and a greater focus on value-added products will mitigate some of the damage.

While improving prices will help everyone, I'm not sure Gold Kist is the way I'd choose to play a poultry recovery. True, they have customers like Costco (Nasdaq: COST  ) , Wal-Mart (NYSE: WMT  ) , Sysco (NYSE: SYY  ) , and Panda Express, but that hasn't saved them. What's more, Gold Kist is a relatively more active exporter, and that market could get tougher as companies in Brazil like Sadia (NYSE: SDA  ) and Perdigao (NYSE: PDA  ) continue to gain global share.

If you want to look for bargains among the maimed and bleeding, best of luck to you. I tried that myself in the pork sector and don't yet have a tremendous amount to show for it -- though my purchase was made with a longer-term intent. Like all cyclical markets, the poultry market will swing up again and carry Gold Kist with it, but I'd probably look to the likes of Sanderson Farms or one of the Latin/South American players if I were going to join the chicken dance.

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Costco is a Motley Fool Stock Advisor pick. Wal-Mart is an Inside Value recommendation. Sysco is an Income Investor pick. Take the newsletter of your choice for a 30-day trial.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).

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