Analysts are upgrading forecasts for fresh pork-to-cooked poultry products supplier Cranswick (CWK), and not for the first time.
This is the third occasion that analysts at Shore Capital have had to recalculate estimates for the year 31 March 2018. Those forecasts have moved higher each time.
Greater confidence in full year performance comes following robust trading through the third quarter, which includes the important Christmas holiday.
Having traded ‘slightly ahead’ of management’s expectations with bacon a standout category, investors have renewed appetite for one of the highest quality growth and income stocks in the mid cap ranks, bid up 68p (2.3%) to £30.06.
The Hull-headquartered food producer, which supplies products under retailers' own labels including Sainsbury's Taste The Difference and Tesco's Finest, says total and like-for-like sales were both ahead of the prior year in the important third quarter.
SIZZLING SEASONAL PERFORMANCE
Impressively, each of Cranswick’s categories delivered positive volume growth, supported by new business wins in pork and poultry and with Shore Capital highlighting a very strong bacon performance over the festive period.
Total export sales were also ‘well ahead’ - China is a strong market for off-cuts including chicken feet - according to today’s well-received statement.
After an 18 month period of rising UK pig prices, the market is now deflationary, a trend which is being reflected in selling prices.
But while lower pig prices create a headwind for sales growth, it also reduces Cranswick’s input costs and should therefore act as a modest boost to profits.
HUNGRY FOR MORE
The outlook statement is upbeat: ‘With experienced management at all levels of the group, a strong range of products, a well-invested asset base and a robust financial position, the board is confident in both the prospects for the remainder of the current financial year and the continued long-term success and development of the business.’
Under CEO Adam Couch, Cranswick continues to take market share via organic and acquisitive means, investing at record levels across its asset base to increase capacity, add new capabilities and eke out efficiencies.
Cranswick ‘continues to invest for growth, but retains significant financial flexibility with little net debt expected at year end’, enthuses Investec Securities, a buyer whose price target increases from £36 to £36.40.
The dividend, a reliable part of the investment story given Cranswick's long track record of annual payout increases that stretches back to 1990, is forecast to rise from 44.1p to 50.8p per share.
‘Cranswick is a high growth, high return and high quality business that merits a premium valuation’, Shore Capital today says.
For the year to March 2019 the broker is estimating taxable profits of £95.2m, earnings of 150.5p and a 54p per share shareholder reward.
