Saputo Earnings: Mixed Performance Sees Sales Grow and Margins Sour; Shares Remain Overvalued

No-moat Saputo’s 9% revenue growth in second-quarter fiscal 2025 appeared impressive at first blush, but it was against an easy comparison with last year’s period in which sales slumped 3% on an 11% shortfall in its international segment. Moreover, Saputo benefited from higher prices and improved volumes in this year’s second quarter, but we’re skeptical that such trends will prove durable. Against a more challenged consumer spending backdrop and given the lack of differentiation in the dairy case, we suspect consumers could opt to trade down to lower-priced private-label options. And even though Saputo chalked up nearly 13% sales growth in Europe (5% of fiscal 2024 revenue), we attribute a portion of this bump to its prior decision to increase its private-label reach in the region. As such, we aren’t altering our long-term top-line outlook for 3% growth annually.