By Gerson Freitas Jr.

Pilgrim’s Pride Corp. signaled the worst is over for U.S. chicken producers with an estimate-beating quarterly profit even as conditions remain “challenging”.

“More restrained” supplies, further easing of restrictions on U.S. exports following a bird flu outbreak and potentially lower grain costs are all expected to contribute to an improved outlook in the next few quarters, Chief Executive Officer Fabio Sandri said Thursday during a call with analysts.

Continued recovery in pricing is needed for the chicken producer to achieve sustainable margin levels, Sandri said.

Chicken producers saw profits slump over the past few quarters as a supply glut and persistently high feed costs were met with sluggish consumer appetite. But Pilgrim’s, which owns operations in North America, the UK and Europe, says financial performance in the three months ended June improved across all regions when compared with the first quarter even as the company continued to face “challenges in overall protein availability and lingering inflation.”

Second-quarter earnings, excluding some items, were 44 cents per share, 71% lower than a year earlier, the company said late Wednesday. Profits rebounded from extremely depressed levels in the previous two quarters, beating even the highest analyst estimate.

Pilgrim’s Pride, the second largest US chicken producer, is controlled by Brazilian meat giant JBS SA. The company is the first major meat producer to report earnings. Tyson Foods Inc. and JBS will release their second-quarter results next month.

The company’s stock was little changed as of 10:18 a.m. in New York.

“Fundamentals still remain on shaky footing in 3Q, but are much improved from what we saw earlier in the year,” Stephens Inc. analyst Ben Bienvenu wrote in a note to clients.

(Updates with CEO comments in second paragraph)

--With assistance from Michael Hirtzer.