We at The Motley Fool have long hosted a carnivore's ball, giving attention to the likes of Pilgrim's Pride (NYSE:PPC), Tyson Foods (NYSE:TSN), Hormel (NYSE:HRL), and even smaller meat mavens like Sanderson Farms (NASDAQ:SAFM). But except for one lone piece written by Bill Mann more than two years ago, there's been nary a word on Mexican chicken producer Industrias Bachoco (NYSE:IBA).
I know, I know -- a Mexican chicken producer? It doesn't produce cybernetic chickens, it doesn't genetically engineer chickens, and its chickens don't come with iPods crammed under their wings. But go pull up a chart of Industrias Bachoco and tell me that this hasn't been a good stock to own since early 2003.
Results for the second quarter merit a hearty olé. Revenue climbed almost 14%, operating income was up almost nine-fold, and earnings per share beat estimates (all two of them) by a healthy 62%. Muybueno.
Chicken sales make up about 82% of the total here. Sales of the bird were up almost 18% as the company saw high-single-digit growth in volume and pricing. Elsewhere, the company saw 12% higher revenue from feed sales, 1.3% higher revenue from pig sales, and 16% less revenue from eggs (the company's second-largest business and 10% of the total).
For the quarter, Bachoco improved operating margins to 20.6% -- a fantastic result relative to both the year-ago level of 2.7% and the margins typically seen by U.S. producers. The secret to the improvement is really no secret at all -- ongoing production improvements coupled with better feed prices.
Of course, there are some aspects of Bachoco that might give investors reason to be chicken. The founding family, Robinson Bours, is still firmly in charge; the company does essentially all of its business in Mexico; and it faces competition from the likes of Pilgrim's Pride and Tyson. What's more, the company doesn't have a stellar record of consistent year-over-year growth.
Nevertheless, I think Bachoco is worth a second look for those who want to stretch their wings and drum up some international ideas. Bachoco offers a respectable dividend, a low P/E, and a play on the ongoing economic development of Mexico. (As people get richer, they eat more meat.) This stock may have its ups and downs, but I think current valuations understate future growth potential.
For more poultry pondering:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
