Report praises ‘underrated’ Glanbia, with earning prospects set to soar
Produced by Merrion Stockbrokers, the report claims the Kilkenny-based group is underrated concerning future earnings, while its steady growth in its nutritionals business will prove a key driver of earnings over the next few years.
Analyst Aoife Wyer said Glanbia has transformed its business from a traditional dairy group to an international nutritional solutions and cheese group over the last decade, with shares potentially growing in value by 20% in the period ahead.
Ms Wyer reiterated her buy recommendation for the group, which is the largest producer of cheddar cheese in the US.
On the basis of the solid outlook she put a target price of €5.75 on Glanbia’s shares, which are currently trading around €4.80 in Dublin.
By 2014, the nutritionals sector will account for 30% of group revenues against 23% today. High cheese prices will also boost growth in the US cheese division in the current financial year, making it well-placed to offset some near term capacity challenges in Idaho.
Trading on a point-to-earnings ratio of 11.0x, but offering average earnings-per-share growth of 12.3% over the next three years, Glanbia’s valuation makes it an attractive purchase at this stage, Ms Wyer said.
The nutritionals division has been the “key driving force in Glanbia’s expansion over the last five years”, Ms Wyer said.
Within the division, the Performance Nutrition unit has performed particularly strongly, contributing more than double market growth rates in 2010 (c 15%).
Better cheese prices in the US should offset near-term challenges, with cheese prices in the year-to-date up 21%, which will boost cheese sales in that market by 12% over the nest year.
Dairy Ireland’s recovery continues, boosted by global demand that has underpinned high cheese and milk prices in the home market, Ms Wyer added.
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