RE:Teal Linde - BNN - BUYLong term are good words to focus in Teale's comments. In a deflationary market it could be difficult to hold, let alone raise prices. That said, inputs should cost less and gross margins could be maintained.
With a 10% deflationary decrease in selling prices, this equals $600 million to Premium annual top line using a 6 billion forecast. Based on most recent 9.7% adjusted EBITDA margin, that is about $58 million their bottom line. Coupled with interest rates expected to be higher for longer, it is sure to put short term pressure on financial results.
All of this said, what if prices drop 20% due to deflationary pressures? I spell it OUCH
The organic growth is exciting and it will be interesting to see if new and existing synergies can get them where they want to go. Multiple expansion not likley considering trading over 36x last years earnings. I can foresee a dividend cut if they are not succesful with their organic growth plans. That said, if they can increase sales 10% organically, it should allow them to maintain the dividend.
At the right price, Premium Brands is very likley a good long term hold. The "right" price might be $50-$60 per share while fetching a 5 to 6% dividend yield. $50 might be a bit pessimistic but time will tell.
On another note, Empire recently announced they will freeze prices, this cannot be good for consumers. I wonder if Empire's suppliers can also freeze prices....
From a consumer point of view, 2024 looks great for lower prices.
Cheers