Broker snap: AB Foods 'due a pause' after recent strong run, says Panmure

16th Jan 2014 10:34

Panmure Gordon has hiked its target price for Associated British Foods (ABF), saying that a 'sparkling' Christmas from Primark more than offsets weakness from its Sugar division and currency headwinds.The broker said the company's first-quarter statement on Thursday signals "an impressive start to the year".The target has been lifted from 2,175p to 2,500p; however, a 'hold' rating for the stock has been maintained as Panmure believes "the shares are surely due a pause for breath" after a "remarkable run".Total group revenues in the 16 weeks to January 4th were unchanged year-on-year, with continued strength at Primark offset by weakness elsewhere, especially in Sugar. Foreign exchange (FX) rates also limited growth during the period as sterling gained against most other major currencies with the exception of the euro."Whilst most multinational FMCG companies are still in an earnings downgrade cycle from currency weakness, and ABF also has a further lurch down in world sugar prices to deal with, a fantastic looking Christmas trading performance by Primark (we estimate like-for-likes over Christmas were up a whopping 8%) means that we are actually nudging up our group earnings per share forecast from 101.0p to 102.0p."The stock, however, was trading down 3.8% at 2,594p on Thursday morning, though still up over 66% over the last 12 months.BC