BMO Capital Initiates AdvancePierre Foods At Outperform, Lays Out 4 Points Of Shareholder Value

BMO Capital started coverage of AdvancePierre Foods Holdings Inc APFH with an Outperform rating and $29 price target, which implies more than 15 percent upside from current levels.

"AdvancePierre, in our view, is a conservative investment vehicle that should outperform its peers, as its new – albeit experienced – management team continues to reshape the company to deliver above-average top-line growth and steady margin expansion through internal actions," analyst Kenneth Zaslow wrote in a note.

Zaslow said the sandwich maker would drive shareholder value by:

  • 1) "Generating above-average industry volume growth, reflecting secular growth, its advantaged profile/product mix, and whitespace opportunities."
  • 2) "Capitalizing on its dynamic pricing model to drive volume/margin opportunities."
  • 3) "Driving margin expansion from ongoing operational improvement opportunities, favorable operating leverage, and lower corporate expense"
  • 4) "Focusing its cash flow on refinancing/debt reduction, dividend, and bolt-on acquisitions."

Zaslow expects AdvancePierre to generate 2016 EPS of $1.04 and 25-30 percent EPS growth in 2017 ($1.34), on reacceleration of sales growth from nearly 5 percent volume growth; EBITDA margin expansion of 50-100 bps, and deleveraging of its balance sheet and debt refinancing.

"Notably, our estimates appear conservative and would benefit from operational outperformance, as we estimate that AdvancePierre will derive 80% of its EPS growth in 2017 from lower interest and corporate expenses," Zaslow added.

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: Analyst ColorPrice TargetInitiationAnalyst RatingsBMOKenneth Zaslow
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!