Greencore Whips Horsemeat Scandal on U.S. Growth: London Mover
Greencore Group Plc (GNC), the Irish food producer that had a bolognese sauce withdrawn from the Asda grocery chain during the European horsemeat crisis, rose for a 10th day on prospects that the U.S. unit will become profitable.
“After an indifferent initial foray in the U.S., Greencore is potentially on the cusp of an opportunity that could revise upward the earnings path of the business,” Cathal Kenny, an analyst at Davy Securities, said in a note to clients today.
Greencore rose 0.4 percent to 116.5 pence at 10:45 a.m. in London, heading for the highest closing price since October 2009. The Dublin-based company’s stock has advanced 10 percent in 10 days, the longest rising streak in 15 months, and is up about 14 percent this year.
Greencore plunged as much as 20 percent in February as its sauce was withdrawn from Wal-Mart Stores Inc.’s (WMT) Asda outlets. Subsequent investigation found no evidence of horsemeat contamination. Retailers across Europe withdrew products such as lasagnas and meatballs when some were shown to contain horse DNA. The scandal led policymakers to put pressure on the industry to make the food chain less opaque.
Greencore, due to release fiscal first-half earnings on May 21, may report revenue that was slightly ahead of last year’s 567.7 million pounds ($868.6 million), with operating profit up 3.9 percent at 33 million pounds, Davy’s Kenny predicted. He has a neutral recommendation on the stock.
“The U.S. looks set to take up the baton of growth” this year, Nicola Mallard, an analyst at Investec with a buy rating on the stock, said in a note to clients on May 10. “The swing from the U.S. from loss to profit could be in the region of 5 million pounds this year.”
Greencore has started supplying chilled products to about 10 percent of Starbucks Corp. (SBUX)’s U.S. outlets this year. The contract is worth about $50 million in revenue in a full year, Mallard said. The Irish company’s profit may be more biased toward the second half than usual, she wrote.
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