Glanbia shares rally on Investec upgrade

JOE BRENNAN

Shares in Glanbia received a boost in early trading on Tuesday after after analysts in Investec upgraded their stance on the nutrition group's stock, saying they believe it has been "oversold".

While the shares jumped as much as 2.2 per cent to €15.30, the advance was subsequently largely reversed, in line with a sell-off across European markets and early losses across equities on Wall Street. The shares ended up 0.5 per cent .

The upgrade, to hold from sell, was part of a broader review of Irish publicly-quoted companies in the consumer sector, where Investec has lowered its earnings forecasts for seven companies, from C&C to Origin Enterprises, as a result of sterling weakness against the euro.

"A circa 14 per cent dip in share price over the last two months with no change in general business conditions has Glanbia trading at a discount to peers for the first time in over two years," said Ian Hunter, an analyst with Investec.

While Mr Hunter said he remained “cautious” on Glanbia’s ability to grow its revenues and margins, the share price slump has been “excessive”.

He sees Glanbia delivering a trading update next week that will show a 2.6 per cent decline in like-for-like sales for the first nine months of the year, although acquisitions should add 3.8 per cent to the top line. The company is due to publish a trading update on November 2.

“While we remain cautious on short-term progress, we believe Glanbia has a solid business where one division in particular, Glanbia Nutritionals, has been hit by external pricing [PRESSURES], which in time will reverse,” Mr Hunter said.

Glanbia Nutritionals, which supply food companies with nutritional products based on whey, speciality grains and other dairy and non-dairy ingredients, is likely to have suffered an 9.7 per cent fall in prices, amid weaker global dairy markets, he said.

Investec has cut its 2017 earnings per share forecast for Glanbia by 0.3 per cent, while taking a similar amount off its estimates for Kerry and Total Produce.

However, it has pulled back its projections for Origin Enterprises, which generates two-thirds of its revenue in the UK, by almost 2 per cent, while its estimates for C&C and Fyffes drop 1.8 per cent and 0.8 per cent respectfully.