Cranswick shares jump following positive trading update

Investing.com -- Shares of Cranswick plc, one of the UK’s leading food producers, rose after its trading update for the 26 weeks ending 28 September 2024. 

At 5:33 am (0933 GMT), Cranswick was trading 5.9% higher at £4,993.4.

“Trading since the end of the first quarter has been stronger than previously expected,” the company said in a statement.

The core UK food business has shown strong volume growth, indicating robust consumer demand and effective market strategies. 

Additionally, the company’s expanding pig farming operations have begun to yield positive results, further aiding overall performance. 

As a result, Cranswick anticipates that its first-half performance will exceed that of the same period last year, a forecast that has been warmly welcomed by the market. 

Over the past two months, there has been considerable interest in Cranswick, as investors are drawn to the compelling narrative surrounding the company and its effective execution of strategy, said analysts from Barclays in a note. 

However, many have noted the relatively high valuation of approximately 18 times FY25 P/E, which positions Cranswick ahead of several European and UK small and mid-cap, as well as large-cap Consumer Staples companies. 

“We believe the valuation still offers upside potential for arguably the best compounding European Staples name in the sector with consistent top line and earnings delivery that continues to diversify their revenue mix,” said analysts from Barclays. 

“We believe the valuation still offers upside potential for arguably the best compounding European Staples name in the sector with consistent top line and earnings delivery that continues to diversify their revenue mix

The company’s ongoing investments in its asset base are critical for maintaining its competitive edge. The company has successfully commissioned a new houmous facility in Worsley, Manchester. 

This investment is expected to boost production capabilities and meet the growing consumer demand for plant-based food options, aligning with current trends toward healthier eating.

“We continue to anticipate total investment running ahead of the £100m capex guidance, and look to a ROCE of c.20% as projects mature - this should support ongoing outperformance of growth expectations,” said analysts from Jefferies in a note. 

Looking ahead, while Cranswick’s management remains cautious about the broader economic and geopolitical landscape, “our outlook for the current financial year ending 29 March 2025 is now expected to be towards the upper end of current market expectation,” the company said. 

“This solid performance gives us confidence that the shares' recent strong performance can be sustained,” said analysts from RBC Capital Markets in a note. 

Source: Investing.com