Pilgrims Pride shares drop after stock offering

Pilgrims Pride shares fell $1.42, or 5.5 percent, to $24.44 in midday trading. The stock has fallen from a 52-week high of $41 in September to a low of $18.50 in April.

Late Monday, Pilgrim's Pride said it planned to sell 7.5 million shares for about $180 million. The company confirmed Tuesday that the offering priced at $24 per share.

Stephens Inc. analyst Farha Aslam said the offering is expected to increase shares outstanding by about 11 percent to 12 percent.

The company said it plans to use the net proceeds of the offering to reduce outstanding debt under its credit facilities and for general corporate purposes.

"We are surprised that the company is choosing to issue equity at the bottom of a commodity cycle, particularly given that the company had negotiated more liberal terms in its credit agreements," Aslam said.

Aslam said the Stephens analysts "are not big fans of the equity offering," but maintained the company's "Overweight" rating because she believes industry trends are improving.

Aslam said production cutbacks and seasonal demand has helped boost boneless skinless breast meat prices by 20 cents to $1.46 per pound. She said prices are expected to surpass $1.80 by the summer.

Lehman Brothers is the sole underwriter of the offering, which is expected to close Friday.