During the past quarter, some news has hit the agricultural industry to help the businesses that operate within it and take some of the inflationary pressure off of the American consumer. The price of soybeans, according to the CME Group (NASDAQ: CME), has plummeted from its high of $480.0 in November down to today’s $332.0 level; that’s a drop of 30.8%!

Consequently, increasingly reliant on soybean feed, chicken feed became much cheaper for farmers and meat product companies. In this way, traders looked to the first stock that came to mind upon this newfound margin expansion due to the lower cost of feeding chickens, Tyson (NYSE: TSN). You can also see the live preference in the way the stock rallied by 38.6% in the past quarter.

While also running up by as much as 52.6% in the same timeframe, Pilgrim’s Pride (NASDAQ: PPC) is piggybacking on the same bullish trend. While some may be scared to consider buying into a stock that has already ‘popped,’ the market suggests that there could be one last leg up to squeeze on their upcoming earnings announcement, but more on that later.

First, get this down

The market is now getting ahead of itself regarding the expectation of interest rate cuts by the FED, which were announced earlier this year and first expected to be implemented by March. That probability is now nearly null, and traders are pricing these potential cuts much later, like May or June.

You can see this shift live by following the FedWatch tool available at the CME Group. So, what does this all mean for stocks like Pilgrim’s Pride? Because that is considered a low-beta stock of 0.78 (moves less aggressively than the entire market), traders and investors dealing with the uncertainty of the FED’s timing may look to these safer names.

Another way of categorizing this stock is to stick it alongside other names considered ‘defensive’ by their usually immune behavior to the cyclicality of consumers and other businesses. In simpler terms, these are called consumer staples businesses.

So, because interest rates typically drive the business cycle, and an uncertain direction and timing from the FED can cause indecision as to where the next phase of the cycle may be, it is the Consumer Staples Select Sector SPDR Fund (NYSEARCA: XLP) that will likely attract investment dollars looking to squeeze out easy returns while the FED makes a decision.

Because of these dynamics currently found in the stock market, some institutions have found a place for their buying power in Pilgrim’s stock, maybe expecting management to not only announce an earnings per share beat in the coming days but also guide for even better growth ahead of the year as a result of increasing margins.

Players are coming in now

While competitor Tyson had analysts projecting a net EPS growth of 58.5% over the next twelve months (excellent for a company in this industry), the insiders are getting rid of some of their stock, which is never a good sign. Noel W. White, Director, sold 9 thousand shares as of February 20 for a net transaction of $484 thousand.

On the other hand, it is investment houses like Morgan Stanley (NYSE: MS) and Barclays (NYSE: BCS) that started to trickle in to add to their positions in Pilgrim’s stock this month, considering that the big move has already been happening since 2023, this late buying into the momentum can be a confirmation of a further expectation for a higher ceiling.

Would it come as a surprise to learn that analysts at Barclays and BMO Capital Markets upped their price targets to $27.0 and $28.0 a share, respectively? Of course, these represent a downside from where the stock trades today, but keep in mind that these targets were set in the third quarter of 2023, even before the chicken margins started to boom.

Now that margins have not only been expanding for the past two quarters but that management is now likely to express their positive outlooks for the business in the coming months, it wouldn’t be too far-fetched to think that these same analysts will once again bump their price targets to reflect the fair upside to be had in this name.

One last thing to keep in mind is that despite having a fantastic run of more than 50.0% in the past two quarters, Pilgrim’s stock still trades at a discount to Tyson on a P/E basis. A valuation of 18.8x P/E would bring you an 18.0% discount to Tyson’s 22.9x P/E. Ready to squeeze the gap?