UPDATE: Morgan Stanley Raises PT on Pinnacle Foods Following Balanced 2Q13 Results
In a report published Thursday, Morgan Stanley analyst Matthew Grainger reiterated an Equal-Weight rating on Pinnacle Foods (NYSE: PF), and raised the price target from $25.00 to $27.00.
In the report, Morgan Stanley noted, “Benign inflation and ongoing plant consolidations, coupled with PF's distinctly lean operations, give us confidence in MSD annual base-business EBIT growth in 2013/14. Longer-term, we believe Pinnacle has the potential for consistent growth, but remain somewhat concerned by its limited pricing power and historical susceptibility during periods of significant input cost inflation. PF offers a 2014e FCF yield of nearly 10%, enhanced by recent refinancing and a substantial NOL benefit. This provides both support for a substantial dividend and further flexibility for deleveraging/M&A. Our $27 PT assumes PF can trade at ~15x 2014e P/E. Our target multiple reflects risks such as PF's below-average structural growth prospects, high leverage, and recent GM volatility.”
Pinnacle Foods closed on Wednesday at $26.34.
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