SunOpta's Forecast Looking Brighter

SunOpta, Inc. (USA) STKL has significantly underperformed over the past several years, and now seems to be “in the early stages of a recovery,” Wunderlich’s Mitchell B. Pinheiro said in a report. He initiated coverage of the company with a Buy rating and $10 price target.

Over the past 15 years, SunOpta has made 35 acquisitions, all of which were operated somewhat independently, without meaningful integration. This resulted in significant inefficiency in strategic decisions and operational results, resulting in several negative surprises, Pinheiro mentioned.

Story Still Compelling

“Despite the execution issues, the backdrop of the SunOpta story remains compelling,” Pinheiro commented. The Global Ingredients business seems to be poised to benefit from robust demand growth for organic, non-GMO and specialty ingredients. The Consumer Products segment’s key categories are recording double-digit growth.

Brighter Prospects

SunOpta is expected to benefit from solid growth in the internationally sourced ingredients segment and new customer growth in the Consumer Product segment in the back half of 2016. The analyst expects 2017 to be a recovery year for SunOpta, with benefits from improved capacity utilization and a continued focus on cost reduction and SG&A leverage.

“While the company still has some near-term challenges, we expect sentiment to become more positive as growth in snacks and healthy beverages begin to outweigh the negatives. We believe the recent activist shareholder additions to the board and preferred stock investment are long-term positives for the stock,” Pinheiro added.

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