Stock Market News
Berenberg sees potential in 'priced for a disaster' Greencore
Analysts at Berenberg took a fresh look at Irish convenience food firm Greencore Group after its recent profit warning.
Berenberg reiterated its 'buy' rating but lower its target price on Greencore to 225p from 250p after the shares dived 30% in one week to under 130p when management downgraded guidance on earnings per share.
The reduced guidance was due to "company-specific factors" in the US, which allowed Greencore's shares to be given another chance by Berenberg, where analysts said "we admit that we have been too sanguine about near-term earnings", while acknowledging that "credibility in the story and management is at a low".
But the shares, at current levels of 7.5 times calendar 2019 EPS and with the enterprise value 6.3 times EBITDA, the market is pricing Greencore "for a disaster".
"While the US growth rates have disappointed to date, with lumpy volume ramp-up, we believe the core business is sound (and sticky), legacy problems are being dealt with and debt covenants are at little risk. We model several scenarios in this note but take a more conservative base-case outlook than previously," Berenberg's Friday morning research note read.
Analysts noted that half the downgrades had been triggered by operating losses at underutilised legacy assets, which were now in the process of being scrapped and that while the ramp-up of hoped-for new volume wins was pushed back around six months, Greencore's UK profit outlook was unchanged.
"While the downward revision of the FY 2018 outlook is clearly disappointing, we believe the share price reaction is significantly overdone. Along with our 'base' case, we model several scenarios that indicate a potential 2020E EBITA range of £106m-197m (margin range 4.5-7.1%) and an EPS range of 9p-20p."
Berenberg reiterated its 'buy' rating but lower its target price on Greencore to 225p from 250p after the shares dived 30% in one week to under 130p when management downgraded guidance on earnings per share.
The reduced guidance was due to "company-specific factors" in the US, which allowed Greencore's shares to be given another chance by Berenberg, where analysts said "we admit that we have been too sanguine about near-term earnings", while acknowledging that "credibility in the story and management is at a low".
But the shares, at current levels of 7.5 times calendar 2019 EPS and with the enterprise value 6.3 times EBITDA, the market is pricing Greencore "for a disaster".
"While the US growth rates have disappointed to date, with lumpy volume ramp-up, we believe the core business is sound (and sticky), legacy problems are being dealt with and debt covenants are at little risk. We model several scenarios in this note but take a more conservative base-case outlook than previously," Berenberg's Friday morning research note read.
Analysts noted that half the downgrades had been triggered by operating losses at underutilised legacy assets, which were now in the process of being scrapped and that while the ramp-up of hoped-for new volume wins was pushed back around six months, Greencore's UK profit outlook was unchanged.
"While the downward revision of the FY 2018 outlook is clearly disappointing, we believe the share price reaction is significantly overdone. Along with our 'base' case, we model several scenarios that indicate a potential 2020E EBITA range of £106m-197m (margin range 4.5-7.1%) and an EPS range of 9p-20p."
Related share prices |
---|
Greencore Group (GNC) share price |
Stock News headlines are gathered from financial news sources around the web. Views and opinions on each item are from their respective authors and website. They are not opinions of LiveCharts.co.uk
Get a free widget for your website with our latest headlines.
You can now add our live prices and new headlines to your website.The news widget features quotes for Oil prices, spot Gold price and Indices plus a choice of news channel for healines.
Top Shares pages
- Share price quotes
- Share charts
- Share watch list
- Company Results Calendar
- Top Large UK Shares
- UK Market Sectors
- Stock market news
- Company news
- Share tips
- A-Z company search
More share features
POPULAR Share Prices
- Royal Mail share price
- Lloyds share price
- HSBC share price
- Barclays share price
- Prudential share price
- Santander share price
- NEXT share price
- Diageo share price
- BP share price
- Vodafone share price
- British Airways
- Centrica share price
- Tesco share price
- Taylor Wimpey Share Price
- National Grid
- GKP Share Price
- Marks and Spencer
- Rolls Royce
- Rio Tinto
- THG Share Price
- Aviva Share Price
- Boil Share price
- Easyjet Share Price
- Genedrive Share Price
- SSE Share Price
- IAG Share Price
- Boohoo share price
- HE1 share price
- AVCT share price
- BOOM share price