Desjardins Securities analyst Chris Li maintained his “Buy” rating and $110.00 target on Premium Brands Holdings (Premium Brands Holdings Stock Quote, Chart, News, Analysts, Financials TSX:PBH), saying weak consumer spending could pressure near-term results but improving cash flow and a potential asset sale could support a recovery in the shares.
Li said the company’s depressed valuation reflects concerns about softer demand in the foodservice market, particularly as consumers reduce discretionary spending.
“At trough valuation of ~8x forward EBITDA, we believe investors expect near-term results to be impacted by a challenging macro backdrop,” Li said in his Nov. 2 report.
Premium Brands, a Vancouver-based specialty food manufacturer and distributor, is scheduled to report third-quarter results after markets close Nov. 5.
Li expects revenue of $2.39-billion, slightly below consensus of $2.40-billion, and Adjusted EBITDA of $219-million, compared with the Street’s $222-million estimate. He forecasts adjusted earnings of $1.53 per share, slightly above consensus of $1.51.
Li said the company’s U.S. specialty protein business should continue delivering double-digit organic volume growth, but delays in promotional offerings at a major quick-service restaurant customer and product launches at two large U.S. retailers could offset some of those gains. He also expects softer foodservice demand to affect Stampede, one of Premium Brands’ U.S. protein businesses.
“Despite continued solid execution, we are a little more cautious on discretionary spending in the foodservice channel given ongoing macro pressures,” Li said.
He remains at the low end of management’s 2026 guidance, which calls for revenue of $9.1-billion to $9.3-billion and Adjusted EBITDA of $840-million to $870-million.
However, Li expects the company to generate approximately $80-million in net free cash flow during the third quarter, supported by improved working capital, earnings growth and lower restructuring expenses. Stronger cash generation could help Premium Brands reduce debt and reach its target leverage ratio of less than three times by mid-2027.
Li also sees potential for a sale of the company’s non-core distribution business during the first half of 2027. He estimates the transaction could generate approximately $1-billion in proceeds, accelerating debt reduction and providing additional financial flexibility. The proceeds could also support share repurchases, dividend increases or investment in higher-return businesses.
Lower beef costs should begin benefiting profitability in the fourth quarter, while improved manufacturing efficiencies and new product launches could support further margin growth in 2027.
Li said these developments could help close the gap between Premium Brands’ current valuation and its longer-term earnings potential.
“While limited visibility could keep the stock range-bound in the near term, positive FCF inflection, leverage reduction, share buybacks and potential sale of the Distribution business are potential catalysts,” he said.
Li made modest reductions to his financial forecasts, lowering his 2026 revenue estimate to $9.11-billion from $9.13-billion while maintaining his Adjusted EBITDA forecast of $840-million.
For fiscal 2027, he lowered his revenue estimate to $9.82-billion from $9.84-billion and his Adjusted EBITDA forecast to $952-million from $954-million. He reduced his 2027 adjusted earnings-per-share estimate to $7.11 from $7.14. Li expects Premium Brands to generate Adjusted EBITDA of $840-million on revenue of $9.11-billion in fiscal 2026
Despite the revisions, Li reminded that Premium Brands trades at approximately 7.9 times forward Adjusted EBITDA, a valuation he considers attractive given its earnings growth and potential balance sheet improvements.
The analysts price target is based on approximately nine times estimated 2027 Adjusted EBITDA.
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