Saputo Earnings: Consumers Sour on Saputo’s Undifferentiated Dairy Products; Shares Unpalatable

We think no-moat Saputo’s fiscal 2024 first-quarter results emphasize its vulnerability to commodity cost headwinds and inability to wield pricing power over its commoditized dairy portfolio. Revenue of CAD 4.2 billion (down 2.8%) and adjusted EPS of CAD 0.36 lag our full-year estimates of 3.8% growth and CAD 1.83, respectively; as such, we intend to reduce our near-term forecast. More critically, a volatile cost environment and macro pressures prompted Saputo to push its CAD 2.125 billion EBITDA target until after fiscal 2025. However, our model had already called for an elongated horizon over which to hit this mark, with the firm not reaching its aims until fiscal 2028. When taken with our unchanged long-term outlook (low-single-digit average sales growth and a high-single-digit EBITDA margin by fiscal 2033), we don’t plan a material change to our CAD 26.30 fair value estimate, rendering shares a touch rich.