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On Wednesday, Jefferies initiated coverage on Grupo Bimbo SAB de CV (BIMBOA:MM) (OTC: OTC:GRBMF), a $12.1 billion market cap food products giant, with a Hold rating and set a price target of Peso64.00. According to InvestingPro analysis, the stock appears undervalued at current levels. The firm highlighted the US market as Bimbo’s most significant opportunity for growth. Grupo Bimbo aims to expand its product range and increase its penetration in convenience and dollar stores in the United States. The company is currently operating in approximately 40% of the available points of sale and has plans to double this penetration in the coming years.
In 2024, Grupo Bimbo’s EBITDA margins in the US market reached 8.4%, which was less than half compared to those in Mexico. With impressive gross profit margins of 52.9% and annual revenues of $19.6 billion as reported by InvestingPro, the company demonstrates strong operational efficiency. Jefferies’ initiation of coverage on Grupo Bimbo comes with an analysis of the company’s financial expectations. The price target set by Jefferies reflects a 15 times 2026 estimated Price-to-Earnings Ratio (PER) and 7 times Enterprise Value to EBITDA (EV/EBITDA). This valuation is consistent with the historical average of 21 times, and it aligns with the target multiple set for Gruma, another player in the industry, which stands at 15 times 2026 estimated versus 11 times currently.
The research firm pointed out that despite Grupo Bimbo having higher leverage and lower returns on capital compared to its industry peer Gruma, the company maintains a Return on Invested Capital (ROIC) of 12%, versus Gruma’s 27%. For deeper insights into Grupo Bimbo’s financial health, valuation metrics, and growth potential, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro, which includes detailed analysis of the company’s competitive position and future prospects. The analysts at Jefferies consider the reduction of debt and the successful execution of the company’s expansion strategy in the US as key factors for Grupo Bimbo’s future performance. The firm’s coverage on Grupo Bimbo indicates a cautious optimism, acknowledging the potential for growth in the US while also considering the financial metrics that could influence the company’s stock value.
In other recent news, Scotiabank (TSX:BNS) has upgraded Grupo Bimbo’s stock rating from Sector Perform to Sector Outperform. Analyst Felipe Ucros adjusted the price target from Peso84.00 to Peso78.00, reflecting recalibrated expectations for the company’s financial performance. The decision was influenced by the company’s recent challenges, including unsatisfactory performance in North America and higher capital expenditures. Despite these issues, Ucros expressed optimism about Grupo Bimbo’s future, noting an anticipated slowdown in investment rates and improvement in the U.S. market. The analyst highlighted that the company’s stock is trading at a decade-low valuation, which he believes presents an attractive entry point for investors. Ucros suggested that historical patterns indicate a potential 51% upside to the stock. This upgrade signifies Scotiabank’s confidence in Grupo Bimbo’s ability to overcome current financial hurdles and seize future opportunities. Investors are paying close attention to these developments as they consider their investment strategies.
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