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On Wednesday, JPMorgan analyst Edward Hockin reiterated an Overweight rating and a EUR115.00 price target on Kerry Group PLC (KYG:ID) (OTC: KRYAY), highlighting the company’s recovery and potential for growth. Hockin pointed out that Kerry Group’s volumes have rebounded through 2024, allowing the company’s shares to recover from mid-2024 lows and outperform its peers in the ingredients sector. The stock is currently trading near its 52-week high of $105.21, with a robust one-year return of 18.6%. InvestingPro data reveals the company maintains strong financial health with an overall score of 2.71 (GOOD).
The analyst noted several factors that are still underappreciated by the market since 2019. Firstly, Hockin emphasized Kerry Group’s mid-term volume growth potential, citing portfolio changes such as the completion of phase 1 of the Dairy Ireland exit. He also mentioned changing consumer trends towards health and wellbeing, which he believes positions Kerry Group favorably in areas like salt and sugar reduction, as well as proactive health and nutritional solutions. The company’s strong market position is reflected in its substantial revenue base of $8.3 billion and healthy gross profit margin of 44.4%.
Additionally, Hockin sees room for further EBITDA margin improvements, which, along with top-line support, could lead to a 10% compound annual growth rate (CAGR) in earnings per share (EPS). He also highlighted the company’s improved free cash flow (FCF), which has stepped up to more than €0.7 billion, and a leverage ratio at 1.5 times, providing the potential for continued share buybacks of at least €0.5 billion per year. InvestingPro analysis shows the company operates with a moderate debt level and maintains a healthy current ratio of 1.54, indicating strong liquidity. Subscribers can access 6 additional ProTips about Kerry Group’s financial strength.
Hockin’s analysis suggests that these factors could drive a total share return potential to around 15% in the medium term, which is at the higher end of the spectrum in the Staples sector. Despite the stock’s re-rating from its lows, he believes it remains inexpensive at 18.6 times the projected 2025 earnings (PE 25E), which is approximately a 25% discount to the Ingredients sector. The analyst concluded that there is potential for re-rating as volumes reconnect with consistent compounding and the realization of total share return potential. According to InvestingPro’s Fair Value analysis, the stock appears slightly undervalued at current levels, supporting Hockin’s positive outlook.
In other recent news, Kerry Group PLC received an upgrade from Jefferies, with the firm’s analyst Charlie Bentley revising the stock rating from Hold to Buy. The upgrade comes on the heels of Kerry Group’s successful divestment of its Dairy Ireland segment, a strategic move that Bentley notes has streamlined the company into a singular entity focused on Food Ingredients within the ’Taste & Nutrition’ business. This development is expected to enhance Kerry Group’s margin profile with minimal impact on earnings per share (EPS).
Jefferies foresees Kerry Group working towards providing more detailed disclosures about this division, thereby facilitating comparisons with industry peers. Approximately 70% of the company’s operations remain uncategorized, following a decade of mergers and acquisitions. As the company discloses more information throughout 2025, increased transparency will allow for easier benchmarking against its competitors.
Jefferies’ own comparison suggests a potential 20% upside for Kerry Group’s shares. These recent developments indicate a favorable reassessment of the stock’s outlook by Jefferies.
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