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Why Greencore Is an Appetizing Convenience Food Buy

Greencore is a sandwich and convenience foods manufacturer operating in Ireland and the United Kingdom.

Greencore, a sandwich and convenience foods manufacturer operating in Ireland and the United Kingdom, fell sharply in recent trading; global expert Vivian Lewis, editor of Global Investing, sees the pullback as a buying opportunity.

Greencore published an update report of its business and trading, viewed negatively by the stock market, and its shares were downed from Buy to Hold by UK brokerage Peel Hunt’s Charles Hall.

It is restructuring its U.S. network to cut costs after its buy of Peacock Foods, and issued a new forecast for 2018 profits, starting with a shutdown of its facility in Rhode Island, a repurposing of its Jacksonville (FL) one because it lost a supply contract, and moving business to Peacock’s site in Minneapolis.

It is building out its consumer packaged goods business in the midwest which it expects will boost revenues and earnings starting in early 2019 and said that any business it gains this year will not result in significant costs or gains this year.

Furthermore, CEO Patrick Coveney will be spending half his time in the U.S. and COO Chuck Metzger will report to him. Chris Kirke, the former U.S. CEO is out. It is also hiring senior execs in the U.S. for commercial, finance, strategy and HR.

The 2018 outlook will continue to be based on good organic growth and an improvement in operating leverage, but there will be non-cash impairment charges to income this year. EPS for the FY to Sept. 30 this year is now pegged 1-2 UK pence lower than before, at 14.7-15.7 pence per share vs. earlier expectations 15.7-16.6 p, mostly backloaded to H2.

It also expects to lower its leverage as before to approximately 2x cash flow (earnings before interest, taxes, depreciation, and amortization). It warns of future forex surprises.

This is a surprisingly up-front move from our stock, GNCGY which until now has spent most of its time evading its obligations to U.S. shareholders of the UK listed Irish company. A big thank you to Kelly Fitzsimmons of Financial Media Consultants for having helped me get current information from GNCGY, an unsponsored OTC ADR stock.

The stock fell a ridiculous 28.6% on the news, which is overdone. The whole UK stock market fell after sterling went up sharply over concerns about President Trump sacking his Secretary of State. At $7.25 this thinly traded ready-meals purveyor is an appetizing Buy.

Vivian Lewis is editor of Global Investing.

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