Financial Trading Blog
Stock of the day 06/07/2016 – Associated British Foods PLC
For the first few months of 2016 things were looking fairly solid for ABF. An early in the year decline (down to £29) was quickly overcome and for all of March and the first half of April the stock was trading at £34, not too far away from its 2015 highs. That all changed, however, with the company’s half year update on April 19th.
(Source: IT-Finance.com 06/07/2016)
On the surface the half year figures looked promising. Underling pre-tax profits rose by 4% to £466 million, with revenue at Primark surging by 5% to hit £2.7 billion. However, total group revenue slipped by 2% to £6.1 billion, while most worryingly Primark saw its first fall in like-for-like sales in 12 years, dropping by 1% for the 6 months to the 24th February as the retailer blamed the warmer winter period for the slowdown.
While the initial reaction to the half year results was positive, pushing the stock 2% higher, the stock sank in the days that followed, hitting a 2 and a half month low of £30.37. The company continued to fall across May and June, the pre-Brexit jitters taking the stock to £28.35 on the eve of the referendum results. Of course then Britain voted to leave the EU and everything went haywire, ABF plunging to a 2 and a half year low of £23.40. The stock sits at a current trading price of £25.96 (IT-Finanace.com, 06/07/2016).
So, all in all Associated British Foods could do with a bit of good news, something that could arrive with its update on Thursday. A recovery in the sugar price should give a boost to that previously beleaguered sector, while Primark continues to grow (at an admittedly slowing) pace, and is making tentative steps into the US market following its 3rd store opening in the country at the start of June.
Associated British Foods PLC has a consensus rating of ‘Hold’ with an average target price of £31.91.
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