Now is the time to buy Nomad Foods, Goldman says, highlighting near-term catalysts

Published Mon, Feb 27 20239:29 AM EST

Nomad's management recently delivered a below-consensus earnings outlook — which, according to Goldman Sachs, paradoxically, also presents a promising investment opportunity. Analyst Jason English upgraded Nomad shares to buy from neutral, saying the frozen food parent of Birds Eye (in Europe) and Findus, is currently at a favorable investment point. "We believe estimates have now bottomed and we believe its robust sales momentum has the potential to flow through to higher EPS through the year, even after contemplating higher re-investments and interest expenses," English wrote in a Monday client note. "With potential upward revisions on horizon, we see NOMD's near-trough valuation levels, both in context of its history and relative to broader Food peers as an attractive investment opportunity with favorable risk-reward ahead," English continued. Goldman Sachs says while the London-based company's lower earnings guidance will help reset investor expectations, and believes the forecast is likely conservative and will result in upward analyst revisions ahead. Furthermore, Goldman believes that Nomad's current valuation is attractive relative to its historic levels, and its peers. "Nomad's valuation levels have come in significantly over the past year, partly as a result of guide-downs earlier in FY22 as input cost inflation had a relatively lagged impact (compared to U.S. peers), and securing multiple rounds of pricing is relatively more challenging and protracted across the multiple European markets," said English. The analyst added, "Indeed, not only does its current valuation level on consensus estimates meaningfully lag its historical levels, its bottom-tier valuation relative to the Food peers appears attractive in context of its only slightly lower growth expectations over the next two years for our Food coverage at-large." English maintained his price target of $21, which implies 21% upside from Friday's closing price. The stock is little changed in 2023 after sliding 32% in 2022. —CNBC's Michael Bloom contributed to this report.