Greencore Gains as Goldman Raises Rating to ‘Buy’

Greencore Group Plc (GNC) advanced for a third day in Dublin trading as Goldman Sachs Group Inc. raised its rating on the stock to “buy,” saying the food producer can absorb an industry slowdown and fund its U.S. expansion.

Greencore gained 2 cents, or 2.2 percent, to 95 euro cents as Goldman raised its rating from “neutral” and its per-share earnings estimate for 2009 by 5.5 percent to 19 cents. The brokerage cut its 2010 estimate by 9.6 percent to 15 cents and its price estimate to 1.08 euros ($1.40) from 1.36 euros.

Dublin-based Greencore, which supplies more than 100 million ready meals a year to U.K. retailers, is battling a slump in consumer spending as the Irish and U.K. economies shrink. It aims to double sales in North America every year for the next five years, partly through acquisitions, Chief Executive Officer Patrick Coveney said last month.

“The group has faced material headwinds including input cost recovery lag, Irish property market devaluation and a cost concealment issue,” Goldman analysts led by Fulvio Cazzol said in a note. “However, the business is supported by a relatively healthy balance sheet providing headroom to absorb working capital pressures and expansionary projects in the U.S., which is the center of its growth strategy over the next five years.”

Cazzol said the “sell-off” in Greencore shares, which have fallen about 60 percent in the last three months, is “overdone.” Risks to his view include the loss of supply contracts in the convenience food division and input cost increases, he said.

Greencore’s balance sheet gives the company a “significant advantage in the current environment where many of its competitors are experiencing difficulties,” analyst Michael McMahon at NCB Stockbrokers in Dublin said in a separate note today. McMahon has an “add” rating on Greencore.

To contact the reporter on this story: Louisa Nesbitt in Dublin at lnesbitt@bloomberg.net.

To contact the editor responsible for this story: Keith Campbell at k.campbell@bloomberg.net.

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