Cadbury's Q3 numbers - what the analysts say
Shares in Cadbury, the UK confectioner, are on the rise again today (21 October) after the company lifted its targets for annual sales and margins. The Dairy Milk maker's third-quarter numbers beat analyst forecasts and now the scene is set ahead of Kraft Foods' own quarterly figures on 3 November - and the 9 November deadline for any formal takeover offer. Not all analysts, however, were sweetened by Cadbury's data.
Here is a flavour of what the analysts said after Cadbury unwrapped its results this morning.
"This puts the ball firmly back in Kraft's court, and is exactly what Cadbury shareholders would have hoped for. We think this statement, plus confidence expressed about 2010 and 2011, significantly reduces the chance of Cadbury being acquired 'on the cheap' and as such we raised our target price from 860p to 900p. Buy" - Panmure Gordon.
"Q3 trading is ahead of our expectations with organic sales growth of 7% (Caz 4%). This is better than the more cautious commentators' expectations. Further, it has improved its disclosure to include the year-to-date EBIT margin (up 180 bp at constant FX), which implies it is well on-track to deliver an (upgraded) EBIT margin progression of 135 basis points at constant FX in 2009E" - Polly Barclay, Cazenove.
"Cadbury management has successfully laid out its hand in the Q3 interim statement, showing how attractive Cadbury is - and this trading update should put further pressure on Kraft to increase its bid" - Andrew Wood, Sanford Bernstein.
"The results are so good, one might have been tempted to think that Cadbury steered them deliberately to put pressure on Kraft! But there was no 'cheating' and the guidance makes it clear that more is to come. In the end, the results are simply a natural consequence of appropriate strategies and successful implemention" - independent analyst James Amoroso.
"For us, the quality of Q3/H2 growth is not premier cru and the upgraded margin guidance owes much to a lower A&P. However we think this will be enough to cause Kraft et al to think hard about a fair exit valuation. Buy maintained" - Martin Deboo, Investec.
"I think Cadbury is somewhat dressing up the bride and we wonder whether recent performance is sustainable. We believe price/mix is unsustainably high at 10% and further volume impact might be the result. The cutting of A&P to sales for FY09 of c.60bp makes the margin uplift less exciting in our view" - Marco Gulpers, ING.
"We are not surprised that Kraft has waited to see Cadbury's Q3 trading announcement before it puts forward a firm offer. We believe Kraft could use its own Q3 results announcement to reiterate its investment case in Kraft and the strategic rationale behind its proposal to acquire Cadbury" - Barclay.
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