UBS has hiked its target price for Greggs PLC (LON:GRG) on Wednesday after raising its 2019 sales and earnings estimates for the pasties to sausage rolls retailer following a strong Christmas trading update which led the group to up its full-year 2018 profit guidance once again.
The Swiss bank raised its discounted cashflow-based target price for the FTSE 250-listed firm to 1,500p, up from 1,400p previously, with the stock trading at 1,453p, up 5.3% on Tuesday’s closing price.
In a note to clients, UBS’s analysts noted that Greggs delivered strong fourth quarter trading, with like-for-like sales growth of 5.1% and a total sales rise of 7.2%, leading the firm to raise its full-year 2018 underlying pre-tax profit guidance to at least £88mmln versus the at least £86mln figure it hiked it to in the November upgrade.
They said: “We believe that this result highlights the current momentum in the Greggs business, which looks to be taking market share with growth driven by a healthy mix of footfall and basket size growth.”
The analysts increased their 2019 like-for-like sales growth forecasts for Greggs to 3.0% from 2.8% to reflect strong current trading in combination with the softer comparatives expected through the first half.
They also upgraded their earnings per share estimate for the bakery products retailer by 4% for full-year 2019 and forecast underlying earnings (EBIT) of £95mln and a flat year-on-year EBIT margin.
Repeating a ‘buy’ rating on Greggs shares, the analysts concluded: “We continue to believe that one of the underappreciated aspects of the investment case is the improving quality of the estate driven by the net openings program.”