Shares in Greencore shot up 10% this week as another profits upgrade led to analysts in the City raising their target prices for the stock.
In an unscheduled trading update on Tuesday, the food-to-go supplier boasted of “an outstanding performance” in the final three months of the year to 27 September.
The group has seemingly emerged unscathed from the precautionary recall of sandwiches earlier in the summer as supermarkets and manufacturers worried about an e.coli outbreak linked to lettuce.
Greencore showed its strength across the board in the fourth quarter, with “almost all” its categories recording like-for-like volume growth.
Like-for-like revenue growth for Q4 came in at 3.7%, pushing the full-year figure to 3.4%, with the group expecting annual revenues of around £1.8bn.
Profit conversion during the final quarter was ahead of expectations and led to Greencore lifting forecasts for adjusted operating profits from previous estimates of £88m-£90m to £95m-£97m. It is the second upgrade to profits from the group in the past three months.
CEO Dalton Philips, who has led the turnaround strategy since taking the reins in 2022, said the group’s focus for the new financial year remained on “making really great food, rebuilding our profitability, and positioning Greencore to be the UK’s leading convenience foods manufacturer”.
Investors ongoing optimism on the stock’s transformation continued on the back of the statement, with share prices having now more than doubled since the turn of the year to sit at 200.5p.
AJ Bell investment director Russ Mould called it “an impressive comeback” for a company derailed by the pandemic.
Clive Black of Shore Capital said Philips, and his team, deserved “a pat on the back for the work undertaken”.
HSBC raised its target price for the stock from 190p to 196p following the update. Analyst Max Church said: “Q4 volume growth of 1.7% shows encouraging signs for the current trading environment, especially given the poor UK summer weather conditions, which tend to have an adverse impact on consumer demand for food-to-go.”
He noted that stand-out category performers in the quarter included sandwiches and sushi, where Greencore is taking market share, helped by an alignment with “certain food retailers who are currently outperforming”.
Patrick Folan of Barclays flagged the previous upgrade to profits in July and said the performance had benefitted from “ongoing commercial, operational and cost initiatives, while focusing on product innovation and delivering an optimal product mix to unlock value”.
“Lower food inflation levels, better end to summer weather and Greencore’s new SKUs launched across Q3 also would have helped like-for-like growth throughout Q4,” he added.
Analysts, however, highlighted that the new upgrade was flattered by £2.5m of costs from a tech transformation incurred by the company that are now being treated as exceptional.
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