What the Analysts Say: Saputo Inc.What the Analysts Say: Saputo Inc.
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Raymond James analyst Ron Ho continues to rate the shares of Saputo
Inc. (TSX-SAP, $33.72) an outperform. However, he has raised his six-
to 12-month target price to $37.50 from $36.00.
Yesterday, Saputo released its financial results for the fiscal fourth
quarter, ended March 31, 2006. EPS came in at $0.36 compared to $0.57
a year earlier and below the analyst's estimate of $0.43. Revenue
increased more than six per cent, to $969.9 million, but came in below
Mr. Ho's forecast of $1 billion.
EBITDA* declined 17 per cent as a result of a lower U.S. "milk-cheese
spread" (the difference between milk costs and cheese prices), higher
input costs and a tax that impacted exports from its operations in
Argentina.
"Overall, we believe the worst of cyclical dairy pressure is over,"
the analyst says, "with the past two quarters paving the way for
[improved] earnings and expanding margins in fiscal 2007S." However,
he adds, the latter may not occur until the second half of fiscal
2007.
Mr. Ho recommends Saputo "[f]or investors preferring stability over
current volatile markets." Moreover, he says, investors can anticipate
"a return to historic organic revenue and margin growth, while
awaiting an acquisition-driven growth spurt."
Saputo Inc. is a dairy processor and cheese producer. The company's
products are offered under a range of brand names such as Saputo,
Stella, Dairyland and Vachon.
*EBITDA is earnings before interest, taxes, depreciation and
amortization.
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