Gruma S.A.B. Touches New 52-Week High - Analyst Blog

American Depository Receipts (ADRs) of Gruma S.A.B. de CV GMK scaled a new 52-week high of $47.93 during its trading session on Jun 30.
 
Gruma S.A.B. closed at $47.85, reflecting a solid year-to-date return of 57%. The trading volume for the session was 0.02 million ADRs. Earnings estimate revisions for 2014 and 2015 indicate further upward potential for this processed and packaged goods manufacturer.

Growth Drivers

Last month, Gruma S.A.B. took strategic decisions of buying a Spanish tortilla maker and divesting its Mexican wheat flour operations. The twin transactions were aimed at expanding the company's market presence as well as focusing on core business growth.

Gruma S.A.B. will purchase Mexifood Spain, a leading local producer of wheat tortillas, corn tortillas, chips, tortilla chips and Mexican sauces, for $15 million. The transaction will make Gruma S.A.B. the third largest tortilla maker in Europe.

Also, the company signed an agreement with Grupo Trimex, S.A. de C.V. to sell its Mexican wheat flour operations at $200 million. The transaction, subject to regulatory approvals, is expected to complete by the end of Oct 2014.

Additionally, Gruma S.A.B. fared well in first-quarter 2014. Net earnings, in local currency, soared 279% year over year driven by healthy top-line performance and margin improvement. Revenues climbed 2.6% on the back of a solid performance in the U.S. Sales volumes increased 1% to 1.04 million tons. The top-line growth was complemented by improvement in cost of sales, which as a percentage of revenue, was 66.2% versus 68.1% in the year-ago quarter. This, in turn, improved the gross margin.    

Estimate Revisions Show Potency

In the last 60 days, the Zacks Consensus Estimate for Gruma S.A.B. has gone up 3.1% to $2.00 for 2014 and 3.8% to $2.17 for 2015.

Gruma S.A.B. currently has a $5.2 billion market capitalization and sports a Zacks Rank #1 (Strong Buy). Other companies worth considering in the industry include The Hillshire Brands Company HSH, Limoneira Company LMNR and Wilmar International Limited (WLMIY). All these stocks hold a Zacks Rank #2 (Buy).

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