Seeing “demand fundamentals on the mend,” Raymond James analyst Steve Hansen raised Ag Growth International Inc. to “outperform” from “market perform” previously.
Before the bell on Wednesday, the Winnipeg-based company reported record adjusted earnings before interest, taxes, depreciation and amortization of $84.5-million, up 11 per cent year-over-year and above both Mr. Hansen’s $80-million estimate and the consensus projection of $83.2-million. He attributed the beat to better-than-anticipated sales, up 2 per cent year-over-year, and margins, rising 1.64 per cent to 20.6 per cent (versus his 20-per-cent expectation).
“We are upgrading our rating on Ag Growth International ... based upon: 1) rapidly improving demand fundamentals in Brazil; 2) incremental evidence that North American growers are returning to the table for permanent storage; and 3) the recent retreat in AGI’s share price that introduces a more attractive risk-adjusted entry point, in our view,” said Mr. Hansen.
Also touting gains in its digital business and potential growth projects, he maintained a $64 target for Ag Growth shares. The average is $77.11
Elsewhere, National Bank’s Maxim Sytchev raised his target to $75 from $73 with an “outperform” rating.
“Investors were especially jittery heading into the quarter with concerns about how the rolled over ag names could impact AFN’s fundamental progression,” he said. “While lower crop commodity prices are not great, the company’s transition to a more international entity (Brazil is really performing well), a clearer focus on best practices that translates into stronger margins, de-emphasizing unprofitable digital initiatives (and now in fact $2.5-million positive contribution in the quarter) and debt repayment are all leading to a positive compounding dynamic at still reasonable valuation (especially post the recent downdraft). We therefore believe that shares should reclaim their prior highs.”