Will Premier Foods shares trade higher after planned Hovis sale?

Premier Foods will release its full-year results on Wednesday 24 June, with the stock climbing higher ahead of its latest earnings after the company reportedly made plans to sell its bread brand Hovis.

The Hovis sale, which is valued at around £150 million, helped the British food maker’s share price climb more than 6% since Wednesday last week, with it closing 3% higher on Monday at 59p per share.

News of the sale was first reported by Sky News last week, but a spokesperson for Hovis refused to comment on ‘market rumour and speculation’.

Peel Hunt reiterate ‘buy’ rating ahead of Premier Foods results

Last week, analysts at Peel Hunt reiterated their ‘buy’ rating for Premier Foods and issued a price target of 80p per share for the stock – implying a potential upside of 35.5%.

‘The pandemic and lockdown have increased demand for bread and so this is probably a sensible time for Gores to be looking at an exit,’ Peel Hunt said in a note.

‘As mentioned above, this is not a process driven by Premier, but clearly any cash proceeds would be very welcome and accelerate the process of paying down expensive debt,’ the broker added.

Analysts from Shore Capital said that if the sale did go ahead it would likely receive interest from regional brands and private equity firms.

Shore Capital also noted that a £100 million price tag for Hovis is a little high, but admitted that ‘a sale would represent another particularly helpful step down in net debt and would further underscore the scope for a structural re-rating’.

Premier Foods: technical analysis

Premier Foods have managed to leave behind the Coronavirus fears in Q1 to bring about a four-year high of late, with the company spurred into a period of sharp upside off the back of the seven-year lows seen in March, according to Josh Mahony, senior market analyst at IG.

‘Up ahead we have major resistance in the form of the 62p peak seen in early 2016. A break through that point would bring about a renewed bullish outlook, building on the recent period of upside,’ Mahony said. ‘The four-hour timeframe highlights the bullish breakout following the period of consolidation throughout April and May, with subsequent upside providing a remarkably consistent push higher.’

‘As we approach that 629p threshold, there is a chance we could start to consolidate or reverse. Thus it makes sense to see how we react to that level before turning lower,’ he added. ‘With price continuing to create higher highs and lows, it makes sense to await a breakthrough 62p or below the prior swing low to bring about a fresh outlook for the stock.’

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