Broker snap: Greencore makes 'strong start' to year, says Jefferies

28th Jan 2014 10:56

Greencore is a 'buy', according to Jefferies, after the convenience foods firm reported a 'strong start to the year' with growth ahead of forecasts.The company, which makes ready meals, sandwiches and quiches, recorded revenue of £320.5m for the 13 weeks to December 27th 2013, an increase of 7.2% from the previous year. Jefferies had expected a figure closer to £310m.On a like-for-like (LFL) basis, excluding the desserts business which was sold in January 2013, Convenience Foods revenue - which accounts for the bulk of group sales - was 9% ahead of the previous year, compared with the broker's prediction for a 5% improvement.Jefferies hailed the strong performance of the UK Food to Go category with growth "well ahead of the market".On the whole, the broker said that the outlook was "favourable": "For FY14E, Greencore is seeing more buoyant activity in small stores and in product categories which perform well in these stores, such as Food to Go, while the impact of improving economic conditions in the UK on the larger stores stills remains to be seen."Jefferies currently predicts that earnings per share for the full year will be up 11.4% at 16.1p, 2% ahead of consensus forecasts, driven by 4.4% growth in revenues to £1,250m.The stock is trading at 14.5 times full-year earnings, "implying a 22% discount to the European food sector", the broker said as it kept its 275p target price.The shares were 4.6% higher at 250p by 11:25 on Tuesday.BC