Cranswick Shares Surge After Positive Trading Update

Shares of Cranswick plc, a prominent UK food producer, saw an increase following its trading update for the 26 weeks ending September 28, 2024.

As of 5:33 am (0933 GMT), Cranswick’s stock was trading 5.9% higher at £4,993.4. The company reported in a statement that trading since the close of the first quarter has exceeded previous expectations.

The core UK food business has experienced significant volume growth, indicative of strong consumer demand and effective market strategies. Additionally, the company’s expanding pig farming operations are beginning to produce favorable results, contributing to overall performance.

As a result, Cranswick expects its first-half results to surpass those of the same period last year, a forecast that has been positively received by the market.

In the last two months, there has been considerable interest in Cranswick, with investors attracted to the compelling narrative surrounding the company and its successful execution of strategy, according to analysts from Barclays. However, they noted the relatively high valuation of approximately 18 times FY25 P/E, positioning Cranswick ahead of many small and mid-cap, as well as large-cap consumer staples companies in Europe and the UK.

Barclays analysts expressed confidence that this valuation still presents upside potential for what they consider the best compounding European staples name in the sector, given its consistent top-line and earnings delivery while diversifying its revenue mix.

The company’s ongoing investments in its assets are crucial for maintaining its competitive advantage. Recently, Cranswick commissioned a new houmous facility in Worsley, Manchester, which is expected to enhance production capabilities and cater to the rising consumer demand for plant-based food options, in line with current health trends.

Analysts from Jefferies noted their expectation that total investment will exceed the £100 million capital expenditure guidance, aiming for a return on capital employed (ROCE) of around 20% as projects mature, which should support ongoing growth expectations.

Looking ahead, while Cranswick’s management remains cautious about the broader economic and geopolitical landscape, they believe the outlook for the current financial year ending March 29, 2025, is now expected to be at the upper end of current market expectations. Analysts from RBC Capital Markets added that this robust performance brings confidence that the shares’ recent strong momentum can be sustained.