LONDON – Stock darling Greencore Group PLC is likely to attract some bears after Tuesday’s surprise profit warning.
The shares tumbled as much as 30 percent in London, the most on record, after the Irish food company forecast earnings for this year below analysts’ expectations as CEO Patrick Coveney seeks to tackle persistent problems in its U.S. business. Greencore will be halting fresh production at its Rhode Island facility from March 25. In a press release the company said this decision will address operating losses at the site that continued into fiscal 2018.
The company opened a sandwich-making facility in February 2015, and at the current time roughly 220 people are employed there, according to a company spokeswoman. At the time it was the first new factory Greencore had built in nearly 25 years. The CEO of Greencore USA Liam McClennon said at the time that the company had invested more than $40 million to build “a state of the art complex” at the Quonset Business Park in North Kingstown.
Before today, all 12 analysts tracked by Bloomberg rated Greencore a buy or equivalent, with none recommending a hold or sell. That made it the best-rated among the 11 members of the FTSE All-Share Food Producers Index, according to Bloomberg consensus analyst ratings.
“Having promised significant new business wins, the company has now recognized that these will be slower than hoped and that it needs to address under-utilized plants in the U.S.,” Peel Hunt analyst Charles Hall wrote in a note, downgrading the stock to hold. “Management credibility is clearly damaged.”
Davy cut its recommendation to neutral from outperform, citing “negative earnings momentum and associated uncertainty in North America” in a note. Investec is placing its price target of 263 pence under review.
Lisa Pham is a Bloomberg News staff writer.