Credit Suisse Initiates AdvancePierre Food At Outperform, Positive On Expansion Outlook

Credit Suisse’s Robert Moskow believes AdvancePierre Foods Holdings Inc APFH is a “competitively advantaged company in an attractive category with several avenues for expansion.”

Moskow initiated coverage of the company with an Outperform rating and $29 price target.

Scale & Ability

At 5-8 times the size of its nearest competitor across 70 percent of its business, the analyst mentioned AdvancePierre Foods was the only ready-to-eat sandwich manufacturer with the ability to develop and produce customized solutions for the consumer on a national scale.

Core Volume Growth

Moskow expects the company to witness core volume growth of 5.5 percent in 2016, with 2-3 percent growth in the long term, driven by robust consumer demand for “convenient protein meals,” along with the introduction of new products in the convenient and retail store channels and market share gains from small competitors.

“Management has delivered an eye-popping 600 bps of improvement to its EBITDA margin over the just past two years, and the company's extensive productivity projects provide visibility for 100-200 bps of further expansion through 2019 and fuel for growth,” Moskow stated.

Deflationary protein input cost trends are expected to offer additional tailwind for the company in the near term.

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