Broker snap: Tate & Lyle a 'buy' after full-year beat, says Canaccord

30th May 2013 10:53

Canaccord Genuity has reiterated its 'buy' rating and 900p target price for food ingredients and sweeteners group Tate & Lyle after the company's forecast-beating results and year-to-date underperformance.The broker said that Tate's full-year earnings are some 3.0% ahead of its forecasts due to better-than-estimated Bulk profits and slightly lower interest and tax charges.However, analysts pointed out that the tax charge should revert to a more normal 19% this year and higher IT investment will increase the interest cost. This, combined with US bulk sweeteners weakness in the first quarter ("as cold weather has suppressed demand for carbonated soft drinks") and estimated lower isoglucose margins in Europe, is expected to lead to consensus forecasts being trimmed for the current year. The current consensus estimate for earnings per share stands at 60.6p, up from 58.5p for the year ended March 31st 2013.Nevertheless, Canaccord said that the outlook is "reassuring" and the broker expects the stock to be resilient at current valuations."Following strong outperformance in the last quarter of calendar 2012, the shares have underperformed our universe moderately in 2013 year-to-date."The broker said that now trades on a calendar 2014 price-to-earnings ratio of 13, a discount to the broader staples sector.The shares were down 0.77% at 842.5p by 10:52.