Maple Leaf Foods’ Q2 Profit Falls 66%; Shares Pop 7%

Shares of Maple Leaf Foods Inc (MFI) gained 7% on Thursday morning after Canada’s leading consumer protein company beat expectations in its second quarter. The company said it faced material market headwinds in the quarter.

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Total company sales came in at C$1.16 billion for the quarter ended June 30, an increase of 5.9% from C$1.09 billion in the prior-year quarter. Meat Protein Group sales increased by 7.4%, while Plant Protein Group sales fell by 10.4%.

Meanwhile, Q2 2021 net earnings were C$8.8 million (C$0.07 per share), compared to C$25.7 million (C$0.21 per share) in Q2 2020.

On an adjusted basis, Maple Leaf earned C$0.28 per share in the second quarter of 2021, down 20% from an adjusted profit of C$0.35 a year earlier. Analysts on average expected Maple Leaf to bring in C$0.25 per share in adjusted earnings on C$1.15 billion in revenue.

Maple Leaf president and CEO Michael H. McCain said “As we anticipated, our second quarter faced material market headwinds and a difficult year-over-year comparable quarter due to COVID-19 effects, and yet our business delivered excellent results. In Meat Protein, performance was impressive with sales growth of 7.4% and Adjusted EBITDA margins of 11.6%. We expect our margins to fully recover beginning in the third quarter. In Plant Protein, where we continue to invest for long-term growth, we expected our sales in the first and second quarters to come in soft.

“At the same time, we expect to return to our strategic growth targets or above in the second half of this year. Our brand momentum, innovation pipeline and customer activity all support this.”

As for the outlook for 2021, targets for Meat Protein remain at mid-to-high single-digit sales growth and adjusted EBITDA margin expansion. On the other hand, Plant Protein sales growth is now expected to be at least 30% in the second half of 2021. (See Maple Leaf Foods Inc stock charts on TipRanks)

On July 22, Canaccord Genuity analyst Derek Dley reiterated a Buy rating on MFI while lowering its price target to C$38.00 (from C$39.00). This implies 46% upside potential.

TipRanks analysts’ consensus is that MFI is a Strong Buy based on three Buys and one Hold. The average Maple Leaf Foods price target of C$34.13 implies a 30.1% upside potential to current levels.