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Swells On The Horizon For WhiteWave Foods: Morgan Stanley Ups PT On Margin Expansions

Swells On The Horizon For WhiteWave Foods: Morgan Stanley Ups PT On Margin Expansions
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Morgan Stanley analysts Matthew Grainger, John Colantuoni and Pamela Kaufman believe the ahead-of-expectations margin expansion of WhiteWave Foods Co (NYSE: WWAV) in the first quarter lends support to the thesis that the company can achieve higher full-year results than previously forecast. These comments come on the heels of the company delivering better-than-expected earnings for the January–March quarter.

The three analysts have also expressed their optimism that WhiteWave Foods has the sustainability of a best-in-class growth outlook. As a result, the brokerage has boosted its price target to $49 from $48 projected earlier on WhiteWave shares on increased estimations. The analysts have retained their rating of Overweight on the stock of the company.

Related Link: WhiteWave Foods Shares Reiterated At Buy Ahead Of Q1 Print

Valuation Points To Continued Upside Potential

The analysts believe the relative valuation suggests continued upside potential. The increased price objective reflected higher full-year guidance. The three analysts commented, "We are increasing our 2016/17eEPS forecasts by ~2 percent, from $1.36/1.61 to $1.40/1.64, and continue to expect WWAV to sustain both +HSD (7-9 percent) organic sales growth and mid-high teens EPS growth as the company benefits from ongoing category expansion and volume-driven operating leverage. Our $49 PT (up from $48 prior) reflects ~16x 2016eEV/EBITDA, based on a 25 percent premium to Food peers (vs. 35 percent historically) and assumes WWAV can trade at parity with the average other high-growth staples peers."

Margin Expansion To Support, Achieve Higher Outlook

Morgan Stanley felt that the first-quarter margin expansion, which was better than expectations, bodes well for an increased full-year outlook. The brokerage believes the strong sales trends provide the primary boost to investors' sentiment, as WhiteWave Foods also delivered strong operating leverage. In fact, it supported constant-currency margin expansion by 70 bps braving a 20 basis points headwind from European asset write-down and operating profit growth of ~24 percent.

The three analysts stated results were strong in Americas, up more than 80 bps on an underlying basis, while constant-currency margins were flat in Europe due to its "well-flagged transitional expenses associated with third-party warehousing & distribution." That was due to the fact that the company rebuilt the biggest factory in the region. The three analysts added, "Net, these factors enabled an increase in FY guidance from $1.33-1.37 to $1.38-1.41, reflecting $0.02 of Q1 upside, $0.01 of currency improvement and further margin upside as the year progresses."

At time of writing, WhiteWave was down 0.52 percent on the day, trading at $44.34.

Latest Ratings for WWAV

Sep 2016BernsteinDowngradesOutperformMarket Perform
Aug 2016Argus ResearchDowngradesBuySell
Aug 2016Wells FargoDowngradesOutperformMarket Perform

View More Analyst Ratings for WWAV
View the Latest Analyst Ratings

Posted-In: John Colantuoni Matthew Grainger Morgan StanleyAnalyst Color Long Ideas Price Target Analyst Ratings Trading Ideas


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