1Q18 EPS Miss but with Solid Retail Organic Growth; Lowering Estimates
- 1Q18 (Sept) EPS was $1.07 (vs $1.22 last year), 6 cents under our estimate due to a lower-than-anticipated gross margin from higher freight and food input costs, although Retail (54% of sales) reported solid organic growth of 4%;
- For FY18, our EPS estimate is now $4.75 (from $4.89), up only 3% from FY17, given higher freight and food input costs;
- For FY19, our EPS estimate is now $5.28 (from $5.38), up 11% from our FY18 projection, assuming new management is successful implementing growth/cost savings initiatives and depending on the direction of food input costs.
Lancaster Colony is a manufacturer and marketer of food products for the retail and foodservice channels. Within its Retail segment, the primary food products the company manufactures and sells include: frozen garlic breads; frozen Parkerhouse style yeast rolls and dinner rolls; salad dressings; vegetable dips and fruit dips; flatbread wraps and pizza crusts; sprouted grain bakery products; salad dressings; and croutons and salad toppings. Within its Foodservice segment, the primary food products the company manufactures and sells include: salad dressings; frozen garlic breads; frozen Parkerhouse style yeast rolls and dinner rolls; and frozen pasta.
Great Lakes Review is located in Cleveland, Ohio, was founded in 1981 and became a division of Wellington Shields & Co. LLC in 2011. Great Lakes Review is a research boutique focused on the fundamentally-oriented investor seeking companies that dominate their respective specialty niche regardless of industry. The objective is to make money for the long-term by gradually accumulating a diversified portfolio from a universe of no more than 30 companies. Although short-term-oriented accounts will be alerted to trading opportunities, aggressive sell recommendations are triggered only by a deterioration in long-term fundamentals, not by short-term blips or investor fancy. Coverage of those names that lose their earnings momentum or earnings predictability may be dropped and replaced with more vital candidates.
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