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On Monday, Deutsche Bank adjusted its price target for Kerry Group PLC (KYG:ID) (OTC: KRYAY), a global taste and nutrition company, raising the target to €86.00 from the previous €84.00. The firm maintained a Hold rating on the stock.
The financial institution anticipates that Kerry Group's upcoming Capital Markets Day (CMD) in the United States on October 8 will provide educational insights and a reiteration of the company's mid-term targets. Additionally, the next trading update from Kerry Group is expected on October 23.
Deutsche Bank forecasts that Kerry Group's organic sales for the third quarter will increase by 2.1%. This growth is believed to be primarily volume-driven, with a 2.9% increase in volumes expected to more than compensate for a 0.8% decrease in pricing. Year-over-year improvements are projected for both divisions of the company.
In the Taste & Nutrition (T&N) sector, the bank projects organic sales growth of 2.3%, attributed to a 3.3% rise in volumes which is likely to outweigh a 1.1% fall in pricing. The third quarter volume growth is anticipated to be slightly better than the second quarter, and the bank does not foresee a significant impact from increased promotional activities at the customer level at this time.
For the third quarter, the group's EBITDA margin is projected to increase by approximately 70 basis points year-over-year, with the Taste & Nutrition division seeing a 60 basis point rise. The improvement is expected to be driven by cost efficiencies, portfolio developments, operating leverage, product mix, and favorable net pricing.
Lastly, Deutsche Bank expects the management to reaffirm its 2024 guidance for adjusted earnings per share (EPS) growth, which is forecasted to be in the range of 7-10% excluding foreign exchange impacts (6-9% including FX, with Deutsche Bank's estimate at +7%).
In other recent news, Kerry Group has been the focus of analyst attention, with Barclays upgrading the stock from Equalweight to Overweight and increasing the price target from €90.00 to €97.00. The upgrade was attributed to the company's resilient earnings momentum, despite share price underperformance relative to its European Consumer Ingredient peers.
Barclays also noted a strategic shift in how Kerry Group allocates its capital, projecting that more free cash flow will be returned to shareholders, likely through continued share buybacks in 2025 and 2026.
Similarly, an analyst at Jefferies updated the price target for Kerry Group from EUR 84.00 to EUR 86.00, while maintaining a Hold rating on the stock. This revision was made in anticipation of the company's half-year results announcement, with the first-half EBITDA expected to reach EUR 547 million, a 2% increase over the consensus estimate. The analyst also projected a modest improvement in volume growth for the full year 2024, largely due to increased innovation and promotional activities.
These are recent developments that highlight the analysts' positive outlook for Kerry Group, particularly in relation to its earnings and capital strategy. The company's upcoming financial results and investor day are anticipated to provide further insights into the sustainability of its growth drivers.
InvestingPro Insights
With Kerry Group PLC (OTC: KRYAY) being a focal point for investors, especially in light of Deutsche Bank's updated price target, it's pertinent to consider additional insights from InvestingPro. Kerry Group has demonstrated a commitment to rewarding investors, having raised its dividend for 33 consecutive years and maintaining dividend payments over the same period. This consistency is a testament to the company's stability and could be a significant factor for income-focused investors.
From a financial health perspective, Kerry Group's liquid assets surpass its short-term obligations, and it operates with a moderate level of debt, indicating a solid financial footing. This is particularly relevant as investors evaluate the company's ability to navigate market fluctuations and invest in growth opportunities. Additionally, analysts predict the company will be profitable this year, which aligns with Deutsche Bank's positive outlook on the company's earnings per share growth.
InvestingPro data further enriches the analysis with a market capitalization of $17.1 billion and a price-to-earnings (P/E) ratio of 22.83, reflecting investor sentiment and market valuation. The company's strong return over the last three months, with a 22.4% total return, also underscores its recent performance momentum. For those interested in a deeper dive, there are over 6 additional InvestingPro Tips available for Kerry Group PLC, which could provide further investment guidance.
These insights and metrics from InvestingPro are directly related to the article's discussion of Kerry Group's financial outlook and Deutsche Bank's price target adjustment, offering readers a broader perspective on the company's financial health and market performance. For more detailed analysis and tips, investors can explore InvestingPro's full suite of tools and data.
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