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On Tuesday, Scotiabank (TSX:BNS) analyst changed the stock rating of Grupo Bimbo SAB de CV (BIMBOA:MM) (OTC: OTC:GRBMF) from Sector Perform to Sector Outperform, while also adjusting the price target from Peso84.00 to Peso78.00.
Analyst provided insight into the decision, citing the company's share price decline due to unsatisfactory performance in North America, higher capital expenditures, and reduced scope for share repurchases. The stock has indeed experienced significant pressure, with InvestingPro data showing a 50% decline over the past year. Despite these challenges, the analyst expressed optimism about the company's future.
Ucros believes that Grupo Bimbo is currently at an attractive entry point for investors. He anticipates a slowdown in investment rates, improvement in the U.S. market, and a reduction in leverage. According to the analysis, the company's stock is currently trading at a decade-low, six times the consensus next twelve months (NTM) EBITDA, a valuation that he expects will not last indefinitely.
InvestingPro analysis supports this view, showing the stock trading near its 52-week low with an EV/EBITDA ratio of 7.39x. Get access to 8 more exclusive ProTips and comprehensive valuation metrics with InvestingPro.
The analyst highlighted that, based on historical patterns, the present moment could be opportune for purchasing the company's shares. With the revised price target of Peso78.00, Ucros suggests there is a potential 51% upside to the stock.
Grupo Bimbo, a leading bakery product manufacturing company, has experienced volatility in its stock price due to various internal and market factors. The adjustment in the price target reflects the analyst's recalibrated expectations for the company's financial performance.
Scotiabank's new rating indicates a more bullish outlook on Grupo Bimbo's stock, suggesting confidence in the company's ability to navigate through its current financial challenges and capitalize on future opportunities. This upgrade comes at a time when investors are closely monitoring market signals and company-specific developments for investment decisions.
In other recent news, Grupo Bimbo, the world's largest baking company, reported a 7.4% increase in net sales during its third-quarter earnings call. This growth coincides with the announcement of the closure of five bakeries in the U.S., Spain, and Canada as part of the company's operational optimization efforts. Despite a 4% decline in sales in North America, the company remains optimistic about its full-year guidance.
The earnings call also highlighted the company's acquisitions of Pagnifique in Uruguay and Wickbold in Brazil, which are expected to enhance Grupo Bimbo's portfolio. However, the company also reported a 300 basis point decline in EBIT margin and a 140 basis point decrease in EBITDA margin year-over-year.
Grupo Bimbo is nearly fully hedged for raw materials for Q4 2024, with a smaller hedge for 2025. Despite underperformance in Colombia and Chile due to competitive pricing pressures and weak consumption respectively, management expressed confidence in growth prospects for these regions by late 2025 or early 2026.
These recent developments underscore Grupo Bimbo's ongoing efforts to adapt and optimize its operations for potential growth in the coming years.
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