Kerry May Raise Long-Term Margin Targets Today, Analysts Say
Kerry Group Plc (KYG), Ireland’s largest food company, will probably raise its margin forecast today when Chief Executive Officer Stan McCarthy updates investors in London on its targets, according to analysts.
“It would be disappointing if they weren’t to raise margin guidance,” said Alicia Forry, a London-based analyst with Collins Stewart Hawkpoint Plc, who has a “buy” recommendation on the stock. “I would be surprised if it were lower than 12 percent at group level.”
Kerry is likely to raise its trading margin target to 11.3 percent by 2016, from a previous forecast of 10 percent by 2013, said Aoife Wyer, an analyst at Dublin-based Merrion Capital Group.
Wyer said the Tralee, South-west Ireland based company may also raise its adjusted earnings per share guidance to 12.5 percent from 10 percent.
Growth will be driven by the success of the company’s restructuring, an increasing presence in emerging markets and its research and development activities, analysts said.
Goldman Sachs Group Inc. analyst Fulvio Cazzol wrote in a note on June 14 that Kerry may “decide to update the group’s goals and long term targets” particularly its five-year margin target of 10 percent.
Shares in Kerry Group rose 0.9 percent to 28.24 euros in Dublin at 8:30 a.m., giving the company a market value of 4.9 billion euros ($7 billion).
“We are hoping to get more guidance on the margin opportunity from streamlining their back-end costs,” said London-based analyst James Targett at Berenberg Bank, which has a “buy” recommendation on Kerry. “I certainly think it would be positive if they did give that.”
Kerry’s margins are “quite low” compared with some of its competitors in the ingredients and flavours industry, such as Tate & Lyle Plc, whose products are more specialized, said Targett.
Kerry may be able to bring its margins up to the “mid- teens” and harness growth from expansion through “bolt-on” mergers outside Ireland, he said.
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