Kerry Group shares dipped marginally and Merrion Stockbrokers reiterated its ‘hold’ recommendation on the stock, yesterday, despite the Tralee-based food giant announcing a US acquisition and a strong organic growth outlook for the next five years.
New chief executive Edmond Scanlon told investors that Kerry expects to deliver yearly adjusted earnings per share growth — on a constant currency basis — of 10% over the next five years and 3%-5% volume growth.
Taste and nutrition volumes are expected to grow by between 4% and 6%, while consumer foods growth of 2%-3% is being targeted.
Mr Scanlon said Kerry’s “unique scalable business model” can deliver continued organic growth across developed and developing markets and 12%+ annual returns on capital.
“We are in a strong position to lead the continued consolidation of our industry, benefiting from the group’s strong balance sheet, scalable business model and geographic footprint,” he added.
Kerry also confirmed the acquisition — for an undisclosed sum — of US branded technology company Ganeden. The company is focused on probiotics and complements Kerry’s Wllmune acquisition from 2015.
The new technologies will be expanded into wider applications across Kerry’s business.
But, with the Kerry stock down by 0.5% at €81.6 yesterday — trading at more than 22 times estimated earnings for next year — Merrion has kept its ‘hold’ recommendation.
“We continue to be impressed with management’s ability to produce stable returns for shareholders but we feel the stock is trading at fair value,” said equity analyst Dylan Simmons.
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