On Thursday, Barclays raised its rating on Premier Foods Plc (PFD:LN) (OTC: PFODF) from Equalweight to Overweight, while also increasing the price target to £2.07 from the previous £1.43. The firm anticipates that Premier Foods will benefit from improving grocery volumes in the UK, as indicated by recent data showing a rise in food volumes, reaching +1.5% in September.
The upgrade comes ahead of Premier Foods' first-half 2025 results, which are expected to be announced on November 14, 2024. Barclays suggests that the company's performance will reflect a positive trend in consumer spending within the new pricing environment. Premier Foods' increased promotional efforts, category expansion, international growth, and recent mergers and acquisitions are also seen as potential catalysts for volume growth, which could support a 3-4% organic sales growth (OSG) going forward.
The optimism surrounding Premier Foods is supported by broader trends in the UK Food sector, where several companies have reported positive updates. Greencore, for example, upgraded their full-year 2024 profit guidance last Tuesday and reported improved volumes across all categories. Similarly, Cranswick has projected a "robust volume" outlook, and Tesco (OTC:TSCDY), which is covered by analyst James Anstead, has also indicated strong volume delivery.
Given that approximately 94% of Premier Foods' group sales are concentrated in the UK market, the firm is well-positioned to benefit from the overall strength in the sector. The company's focus on ambient food within the grocery channel is particularly relevant, as this segment has seen strong volume delivery, which could translate into positive outcomes for Premier Foods' upcoming financial results.
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