Deutsche Bank upgraded Associated British Foods plc (OTCPK:ASBFY) to a Buy rating after having the food stock slotted at Hold.
Analyst Adam Cochrane and team have the view that earnings expectations will start to recover as the headwinds that have been faced during 2022 start to reverse. Help is seen being on the way for AB Foods in regard to energy prices, FX, and Primark seeing a trade-down benefit.
"Sentiment has improved for AB Foods from its lows with a re-rating from September lows but there is still scope for both a re-rating and earnings upgrades in our view. The guidance for FY23e was given at a relative low point for GBP strength and energy headwinds have reduced significantly since this stage. We expect management to take a less bearish view on the Primark EBIT margin guidance at the 1Q trading update. A robust balance sheet and ongoing share buyback provides some technical support."
Deutsche Bank increased its FY23 EPS estimate by 8% and the FY24 EPS by 12% after factoring in the improved backdrop. The firm's price target went to 2180 pence from 1600 pence.
The Seeking Alpha Quant Rating on AB Foods flipped to Strong Buy from Hold on January 9.