News Column

IN THE KNOW: Analysts Have Mixed Feelings About Genus Outlook

September 3, 2014

Steve McGrath

LONDON (Alliance News) - Liberum is forecasting that Genus PLC will post a 9% rise in earnings per share in the 2015 financial year, after the company said it expects its result to meet market expectations, although other analysts were less positive about the company's prospects.

Liberum said the animal genetics company's fiscal 2014 earnings per share, which fell 5%, was still 3.6% higher than it had forecast and it thinks the results add to the confidence that Genus is poised for an earnings recovery.

"Genus states headwinds are abating and FY2015 is on track to meet consensus (we forecast 9% EPS growth). In additon, a new large, US-style royalty agreement has been signed in China porcine and legal action is underway to help clear the way for Genus to enter the sorted-semen processing market in dairy," Liberum wrote in a note to clients.

It has a Buy rating on the stock and a 1,400 pence price target.

Shore Capital said Genus' fiscal 2014 profits were only in line with its forecasts, and thinks the stock is fairly valued for now, although it is also positive about the company's outlook. It is keeping a Hold rating on the stock.

"We continue to see much to like about Genus’ exposure to the increasing global demand for dietary protein. Having lowered its dependence on emerging markets with the GÉnÉtiporc acquisition last year Genus has been hit by multiple, short term, head winds which should abate and potentially benefit further out," Shore wrote to clients.

VSA Capital Research was less optimistic about the company's outlook, and said it remains negative on the stock whilst conceding that lower global feed costs, higher milk, beef and pork prices in key geographies, and a lower weekly rate of US porcine epidemic diarrhoea virus infections should benefit the business.

It said Genus had produced a third year of low growth or contraction, and is still trading on a forward price to earnings ratio of 22.8 times and enterprise value/EBITDA ratio of 15.1 times.

"In our view 2015 doesn’t look likely to produce a huge step forward in performance with the board expecting to perform in line with market expectations," VSA Capital wrote, pointing to consensus forecasts for 5.7% revenue growth and 9.5% earnings before interest and tax growth in fiscal 2015 on FactSet.

Genus shares were up 1.3% at 1,150.00 pence Wednesday morning.

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Source: Alliance News

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